Clark corporation has an average collection period of 7 days, an inventory conversion period of 30 days, and a payables deferr
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Answer:
Effective tax rate =28.50 %
Explanation:
given data
Net Income before taxes = $2,00,000
Interest revenue = $20,000
Life insurance Premium = $10,000
tax rate = 30%
to find out
Fern's effective tax rate
solution
first we get here Taxable Income that is express as
Taxable Income = Net Income before taxes + Life insurance Premium - Interest revenue ........................1
put here value we get
Taxable Income = $2,00,000 + $10,000 - $20,000
Taxable Income = $190000
so
Income tax Liability will be
Income tax Liability = Taxable Income × Tax rate .....................2
Income tax Liability = $190000 × 30%
so Effective tax rate will be
Effective tax rate =
Effective tax rate =
Effective tax rate =28.50 %