Abitz Corporation has the following pretax operating income in its first three quarters of 2016.The effective tax rate for each quarter is provided.Determine the third quarter income tax or benefit. ?

$$\begin{array} { l r r }
& \text { Current } & \text { Effective } \
\text { Quarter } & \text { Period } & \text { Tax Rate } \
\text { First } & \$ 40,000 & 25 \% \
\text { Second }& ( 25,000 ) & 25 \% \
\text { Third }& 50,000 & 30 \%
\end{array}$$

A)$3,750
B)$15,000
C)$15,750
D)$20,000

Question

Abitz Corporation has the following pretax operating income in its first three quarters of 2016.The effective tax rate for each quarter is provided.Determine the third quarter income tax or benefit. ?

$$\begin{array} { l r r } 
& \text { Current } & \text { Effective } \
\text { Quarter } & \text { Period } & \text { Tax Rate } \
 \text { First } & \$ 40,000 & 25 \% \
 \text { Second }& ( 25,000 ) & 25 \% \
\text { Third }& 50,000 & 30 \%
\end{array}$$

A)$3,750
B)$15,000
C)$15,750
D)$20,000

Quizplus · Accepted Answer

To calculate the third quarter income tax, we need to first calculate the cumulative pretax operating income for the first three quarters:
$150,000 + $120,000 + $90,000 = $360,000

Next, we need to calculate the cumulative tax liability for the first two quarters using the effective tax rate:
($150,000 x 0.3) + ($120,000 x 0.3) = $45,000

Now we can calculate the taxable income for the third quarter:
$90,000 - $45,000 = $45,000

Using the provided effective tax rate for the third quarter (0.35), we can calculate the income tax liability for the third quarter:
$45,000 x 0.35 = $15,750

Therefore, the answer is C) $15,750.

Abitz Corporation Has the Following Pretax Operating Income in Its