Please answer this question Exercise 8 LO 4 Ratable allocati

Please answer this question.

Exercise 8 (LO 4) Ratable allocation for nonordinary items. Baxter Corporation anticipated pretax values for the current year as follows: Continuing operations.... Nonordinary items: $60,000 Item A. . . Item B Item C... (30,000 25,000 5,000 $60,000 Total The statutory tax rates are as follows: 15% on the first $50,000, 25% on the next $25,000, 3496 on the next $25,000, and 39% on amounts in excess of $100,000. Determine the tax expense traceable to nonordinary items B and C.

Solution

Calculation of Tax Expense to Non-Ordinary Items: Particulars Ordinary Income Total Income Total - Excluding non - ordinary Loss Total - Excluding non - ordinary Gain Continuing Income (Loss)                        60,000                     60,000                           60,000                           60,000 Non-Ordinary Item A                                  -                     (30,000)                         (30,000)                        (30,000) Non-Ordinary Item B                                  -                       25,000                                    -                             25,000 Non-Ordinary Item C                                  -                          5,000                             5,000                                    -   Pretax Income (Loss)                        60,000                     60,000                           35,000                           55,000 Total Estimated Tax                        10,000                     10,000                             5,250                             8,750 ($50,000 X 15% + $10,000 X 25%) ($50,000 X 15% + $10,000 X 25%) ($35,000 X 15%) ($50,000 X 15% + $5,000 X 25%) Calculation of Incremental Tax Expense: Amount Item B - ($10,000 - $5,250)                           4,750 Item C - ($10,000 - $8,750)                           1,250 Total                           6,000