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Xi Wei Answer Sheet

This document contains an assignment sheet for Accounting 351/551 with 4 problems. Problem 1 involves calculating total income, taxable income, total tax, average tax rate, and effective tax rate for two individuals. Problem 2 calculates taxes for an individual based on whether they take an additional job, and identifies their marginal tax rate. Problem 3 determines tax amounts to ensure horizontal equity. Problem 4 identifies criteria like equity, certainty, and convenience that can be used to evaluate different tax system features.

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217 views3 pages

Xi Wei Answer Sheet

This document contains an assignment sheet for Accounting 351/551 with 4 problems. Problem 1 involves calculating total income, taxable income, total tax, average tax rate, and effective tax rate for two individuals. Problem 2 calculates taxes for an individual based on whether they take an additional job, and identifies their marginal tax rate. Problem 3 determines tax amounts to ensure horizontal equity. Problem 4 identifies criteria like equity, certainty, and convenience that can be used to evaluate different tax system features.

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© © All Rights Reserved
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Section:

Noon 1:30
Name: XI WEI
________________________________________________________________
By typing my name above, I affirm that I have not accepted or discussed and will not provide or
discuss the contents of this assignment from, to, or with another student.

Assignment 1 (Chapter 1) ANSWER SHEET


ACCT 351/551
Upload your ANSWER SHEET and supporting computations to BlackBoard in PDF or MS
Word format only (preferably in ONE attachment). If you do not provide your answers on the
ANSWER SHEET using the right file format, then you will not receive full credit. To receive
partial credit, be sure to show your computations on a separate sheet of paper and make
sure the different problems and answers are clearly marked by circling it, double
underlining it, or highlighting it. If you make it too difficult to find the answer within your
work, I will not count the answer correct.

Problem 1:
Total Income Taxable Income
a. Gill 50000 50000
b. Molly 43000 30000
c. Tax Rates i. 11477.5 ii. 14.35% iii. 12.34%

Problem 2:
Decides NOT to fight Decides to fight
a. Bronn’s total tax 8238.75 20981.75
b. Bronn’s average tax rate 16.48% 20.98%
c. Bronn’s marginal tax rate: 25.49% d. Choose: YES or NO

Problem 3:
a. Leonard pays: 10000 b. Choose: Sheldon or Bernadette

Problem 4: Choose: A. Sufficiency; B. Equity; C. Certainty; D. Convenience; E. Economy


a. B b. D c. A

1
Section:
Noon 1:30
Name: XI WEI
________________________________________________________________
1. Gill and Molly are married and for 2017 each made $50,000 and $30,000 of taxable
income in wages, respectively. In addition, Molly received $13,000 of interest income from
a municipal bond investment that is not taxable.

a. What are Gill’s total income and taxable income?


50000 50000
b. What are Molly’s total income and taxable income?
30000+13000=43000 30000
c. If Gill and Molly file jointly as a married couple for 2017:
i. What is their total tax?
50000+30000=80000 10452.5+25%*（80000-75900）=11477.5
ii. What is their average tax rate?
11477.5／80000=14.35%
iii. What is their effective tax rate?
11477.5/93000=12.34%
2. In the city of King’s Landing, Bronn lives and works as a sell-sword (someone who is willing
to fight with his sword for pay). His most recent client, Tyrion Lannister, has been very generous
this year (2017) offering $25,000 per fight already for each of his first two fights this year. So, in
total, he has earned $50,000 so far. However, Tyrion recently approached Bronn offering an
additional $50,000 if he would be willing to fight Gregore Clegane the next day (still in 2017).
This would be Bronn’s third fight for the year. Assume Bronn files as a single taxpayer and that
whatever he receives from Tyrion constitutes his taxable income.

a. Calculate Bronn’s total tax if he:


i. does not take the new fight (only completed the first two fights)
ii. does take the new fight in addition to the first two
5226.25+25%*（50000-37950）=8238.75
18713.75+28%*（100000-91900）=20981.75
b. Calculate Bronn’s:
i. average tax rate if he does not take the extra fight
8238.75/50000=16.48%
ii. average tax rate if he does take the extra fight
20981.75/100000=20.98%
c. What is Bronn’s marginal tax rate for the additional $50,000 of income?
（20981.75-8238.75）／50000=25.49%
d. Bronn will only take the fight if the additional pay he receives for the fight exceeds the
additional tax he has to pay by $38,000 because he believes Gregore is a very tough
opponent. In other words, he will only take the job if the additional after-tax pay ($50,000
less the additional tax on the new $50,000 of pay) is greater than $38,000. Will Bronn
take Tyrion’s offer for the fight?
20981.75-8238.75=12743
50000-12743=37257<38000 no

2
Section:
Noon 1:30
Name: XI WEI
________________________________________________________________
3. Use the following tax structure to answer questions a. and b.:

Taxpayer Taxable Income Total Tax


Howard $50,000 $10,000
Bernadette $150,000 $30,000
Sheldon $100,000 $20,000
Leonard $50,000 ?

a. For this system to be considered fair in terms of horizontal equity, how much tax should
the tax system require Leonard to pay?
A: because of the horizontal equity, so Leonard’s total tax is same with Howard. So it
should be 10000.
b. Sheldon and Bernadette agree that the tax system should be fair in the sense that it is
vertically equitable, but
a. Sheldon thinks that vertical equity should be assessed in terms of the tax dollars.
b. Bernadette thinks it should be assessed based on the tax rate applied to taxpayers.
Assuming Leonard pays the amount of tax from part a. that makes the tax system
horizontally equitable, is Sheldon or Bernadette more likely to think that the tax structure
above has vertical equity?
Sheldon
4. Using the five criteria for evaluating tax systems from Chapter 1 listed below (labelled A-E),
identify the single criterion that is most relevant for evaluating the tax system features below.
For example: The IRS has used consistent reporting dates (e.g. April 15) so that taxpayers know

A. Sufficiency; B. Equity; C. Certainty; D. Convenience; E. Economy


when to expect taxes to come due. Most relevant criterion to evaluate the example: Choose C.

Different Tax System Features


a. In a made up world, Ben and Zach work at the same job for the same pay. However, the ruler
of the world they live in decides she will tax all taxpayers whose first names start with letters
at the end of the alphabet twice as much as other taxpayers. As a result, Zach pays twice as
much in tax as Ben each year. B
b. U.S. employers must withhold taxes from employee wages and submit the collections to the
government. This allows one central submission of employee taxes to the government from
the employer instead of many individuals submitting separate taxes and forms. D
c. Many states and countries require the state balance its budget (i.e. that projected receipts from
tax revenues equal expenditures by the government) each year. A

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