Question

LO 3.2A company has pre-tax or operating income of $120,000. If the tax rate is 40%, what is the company’s after-tax income?

$300,000
$240,000
$48,000
$72,000

Answer 1

The company's after-tax income is $72,000

Step-by-step explanation:

The company's after-tax income is calculated by using the following formula:

Company's after-tax income = Company's pre-tax income - Income Tax

In there:

The company has pre-tax income of $120,000

Income tax = Company's pre-tax income x Tax rate = $120,000 x 40% = $48,000

Company's after-tax income = $120,000 - $48,000 = $72,000