Chapter 03: Financial Statements, Cash Flow and Taxes
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2018 -$1,200,000 $0 -$1,200,000 $1,200,000
125. . In 2018, Mays Industries taxable income was -$85,000. In 2019, its taxable income was $120,000.
Its corporate tax rate is 25%.Assume that the company takes full advantage of the Tax Code’s carry-forward provision.
What is the company’s tax liability for 2019?
a. $14,400
b. $10,500
c. $8,750
d. $12,480
e. $13,650
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130. Griffey Communications recently realized $120,000 in operating income. The company had interest income of
$25,000 and realized $70,000 in dividend income. The company’s interest expense was $40,000. Its corporate tax rate is
25%. Griffey is a small company, so it is not subject to the interest expense deduction limitation.
Assume a 50% dividend exclusion for tax on dividends.
a. $37,000
b. $35,950
c. $35,000
d. $32,000
e. $40,400
131. Maureen Smith is a single individual. She claims a standard deduction of $12,000. Her salary for the year was
$134,750. What is her taxable income?
a. $105,698
b. $122,750
c. $129,324
d. $121,863
e. $120,620
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Base of the Bracket Plus This Percentage
on the Excess over the
Base Average Tax
Rate at
Top of Bracket
Up to $9,525 $0.00 10.0% 10.0%
$9,525-$38,700 952.50 12.0 11.5
$38,700-$82,500 4,453.50 22.0 17.1
$82,500-$157,500 14,089.50 24.0 20.4
$157,500-$200,000 32,089.50 32.0 22.8
$200,000-$500,000 45,689.50 35.0 30.1
Over $500,000 150,689.50 37.0 37.0
What is her federal tax liability?
a. $30,536.25
b. $45,210.75
c. $34,521.50
d. $40,054.75
e. $30,140.25
134. Maureen Smith is a single individual. She claims a standard deduction of $12,000. Her salary for the year was
$213,650. Assume the following tax table is applicable.
Single Individuals
If Your Taxable
Income Is You Pay This
Amount on the
Base of the Bracket Plus This Percentage
on the Excess over the
Base Average Tax
Rate at
Top of Bracket
Up to $9,525 $0.00 10.0% 10.0%
$9,525-$38,700 952.50 12.0 11.5
$38,700-$82,500 4,453.50 22.0 17.1
$82,500-$157,500 14,089.50 24.0 20.4
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$157,500-$200,000 32,089.50 32.0 22.8
$200,000-$500,000 45,689.50 35.0 30.1
Over $500,000 150,689.50 37.0 37.0
What is her average tax rate?
a. 24.34%
b. 19.18%
c. 22.94%
d. 24.58%
e. 27.29%
135. Alan and Sara Winthrop are a married couple who file a joint income tax return. They have two children, and they
have legitimate itemized deductions totaling $25,750. Their total income from wages is $288,800. What is the couple’s
taxable income?
a. $263,050
b. $249,300
c. $192,550
d. $214,800
e. $207,400
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on the Excess over the
Base Average Tax
Rate at
Top of Bracket
Up to $19,050 $0.00 10.0% 10.0%
$19,050-$77,400 1,905.00 12.0 11.5
$77,400-$165,000 8,907.00 22.0 17.1
$165,000-$315,000 28,179.00 24.0 20.4
$315,000-$400,000 64,179.00 32.0 22.8
$400,000-$600,000 91,379.00 35.0 26.9
Over $600,000 161,379.00 37.0 37.0
What is their federal tax liability?
a. $49,048.50
b. $54,707.25
c. $52,820.50
d. $57,851.50
e. $69,571.00
138. Alan and Sara Winthrop are a married couple who file a joint income tax return. They have two children, and they
have legitimate itemized deductions totaling $25,750. Their total income from wages is $169,100. Assume the following
tax table is applicable:
Married Couples Filing Joint Returns
If Your Taxable
Income Is You Pay This
Amount on the
Base of the Bracket Plus This Percentage
on the Excess over the
Base Average Tax
Rate at
Top of Bracket
Up to $19,050 $0.00 10.0% 10.0%
$19,050-$77,400 1,905.00 12.0 11.5
$77,400-$165,000 8,907.00 22.0 17.1
$165,000-$315,000 28,179.00 24.0 20.4
$315,000-$400,000 64,179.00 32.0 22.8
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$400,000-$600,000 91,379.00 35.0 26.9
Over $600,000 161,379.00 37.0 37.0
What is their average tax rate?
a. 16.3%
b. 17.93%
c. 19.21%
d. 17.20%
e. 14.64%