Question

Lone Star Company is a calendar-year corporation, and this year Lone Star reported $200,000 in current earnings. If the corporate tax rate is 21%, what is the amount of income tax Lone Star Company owes?

Answer 1

Lone Star Company owes $42,000 in federal income taxes after applying the 21% corporate tax rate to their $200,000 earnings.

Step-by-step explanation:

The student asks how much income tax the Lone Star Company owes if it reported $200,000 in current earnings and the corporate tax rate is 21%. Since the company is a calendar-year corporation, they need to pay taxes on profits earned during that year. To calculate the income tax owed, we simply multiply the earnings by the tax rate:

Income Tax Owed = Current Earnings × Corporate Tax Rate

Income Tax Owed = $200,000 × 21%

Income Tax Owed = $200,000 × 0.21

Income Tax Owed = $42,000

Therefore, the Lone Star Company owes $42,000 in federal income taxes for the current calendar year.