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FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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
Transcribed Image Text:Suppose you earn $60,000 per year and pay taxes based on marginal tax rates. The first tax bracket, which taxes at 5 percent, ranges
from $0 to $30,000. The second tax bracket, which taxes at 25 percent, ranges from $30,001 to $120,000. How much will you pay in
total taxes?
Instructions: Enter your answer as a whole number.
%24
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- 1) If you were to save and invest $1,000 a month in after-tax dollars and earn 6% before taxes annually, how much would you have at the end of 10 years, 20 years and 40 Years? Assume you had an effective tax rate on your investments of 30%. 2) If you were to invest $1,000 a month in pre-tax dollars in a 401K plan and earn 6% before taxes annually, how much pre-tax money would you at the end of 10 years, 20 years and 40 Years? 3) Assuming you had saved $2.0 million in your 401K pre-tax, how many years would it last if you withdrew 100K per year and you continued to earn 4%before taxes annually on any balances prior to withdrawal? How much would you owe in taxes if your retirement tax rate was 25%? How much would you have to meet expenses?arrow_forwardTAX SAVINGS. You pay $3000 per month on your mortgage. How much additional tax savings will you realize if $800 of the monthly mortgage payment is interest and your tax bracket is 12 percent?arrow_forwardSuppose you are a manager for a certain company. You earn $50,000 per year and are in the 28% federal income tax bracket. Each year you contribute $5,500 tax free to your individual retirement account, IRA. The account earns 7% annual interest. In addition, the amount of tax that you save each year by making these "pre-tax" contributions is invested in a taxable aggressive growth mutual fund averaging 16%. (a) How much tax do you save (in $) each year by making the retirement fund contributions? $ (b) Using Table 12-1, much will the retirement fund be worth (in $) in 30 years? (Round your answer to the nearest cent.) $ (c) Although the income from this investment is taxable each year, using Table 12-1, how much will the "tax savings" fund be worth (in $) in 30 years? (Round your answer to the nearest cent.) $arrow_forward
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