Question

LO 3.2A company has wants to earn an income of $60,000 after-taxes. If the tax rate is 32%, what must be the company’s pre-tax income in order to have $60,000 after-taxes?

$88,235
$19,200
$79,200
$143,000

Answer 1

$88,235

Step-by-step explanation:

The computation of the pre tax income is shown below:

We know that

Income after tax = Income before tax (1 - tax rate)

$60,000 = Income before tax × (1 - 0.32)

$60,000 = Income before tax × 0.68

So, the income before tax would be

= $60,000 ÷ 0.68

= $88,235

If we consider the tax rate than we can easily compute the income after tax