Liberty ACCT 401 Assignment Chapter 1 Problems Spring 2015

| June 1, 2016

Question
Assignment:

Chapter 1

1.

Problem 1-35 (LO 1-3)

Chuck, a single taxpayer, earns $77,750 in taxable income and $29,250 in interest from an investment in City of Heflin bonds. (Use the U.S..mhhe.com/connect/0077631714/Tax_rate.JPG”>tax rate schedule.)(Do not round intermediate calculations. Round your answers to 2 decimal places.)

a.

If Chuck earns an additional $57,250 of taxable income, what is his marginal tax rate on this income?

b.

What is his marginal rate if, instead, he had $57,250 of additional deductions?

2.

Problem 1-39 (LO 1-3)

Jorge and Anita, married taxpayers, earn $407,500 in taxable income and $72,500 in interest from an investment in City of Heflin bonds. Using the U.S..mhhe.com/connect/0077631714/Tax_rate.JPG”>tax rate schedulefor married filing jointly, how much federal tax will they owe? What is their average tax rate? What is their effective tax rate? What is their current marginal tax rate?(Do not round intermediate calculations. Round your answers to 2 decimal places.)

3.

Problem 1-46 (LO 1-3, LO 1-4)

Hugh has the choice between investing in a City of Heflin bond at 4.50 percent or a Surething, Inc. bond at 7.05 percent. Assume both bonds have the same nontax characteristics and that Hugh has a 40 percent marginal tax rate. What interest rate does Surething Inc., need to offer to make Hugh indifferent between investing in the two bonds?(Round your answer to 2 decimal places.)

4.

Problem 1-51 (LO 1-3, LO 1-5)

Song earns $192,500 taxable income as an interior designer and is taxed at an average rate of 20 percent (i.e., $38,500 of tax).

a.

If Congress increases the income tax rate such that Song’s average tax rate increases from 20 percent to 25 percent, how much more income tax will she pay assuming that the income effect is descriptive?(Round your intermediate calculations and final answer to 2 decimal places.)

b.

If the income effect describes Song’s response to the tax rate change, the tax base and the tax collected will increase.

5.

Problem 1-60 (LO 1-3, LO 1-5)

Congress would like to increase tax revenues by 19 percent. Assume that the average taxpayer in the United States earns $54,000 and pays an average tax rate of 15 percent.

a.

If the income effect is in effect for all taxpayers, what average tax rate will result in a 19 percent increase in tax revenues?(Round your answer to 2 decimal places.)

b.

This is an example of what type of forecasting?

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