If Susan's Income Increases from $40,000 to $50,000 and Her

question 230

Multiple Choice

If Susan's income increases from $40,000 to $50,000 and her tax liability increases from $6,000 to $9,000, which of the following is true?

• A) Her marginal tax rate is 18 percent in this range.
• B) Her marginal tax rate is 30 percent in this range.
• C) Her average tax rate was 22.5 percent when her income was $40,000.
• D) The tax structure must be regressive in the range between $40,000 and $50,000.

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Definitions:

GAAP

Generally Accepted Accounting Principles; a set of accounting standards and practices used to prepare financial statements in the U.S.

Service Contract

A service contract is a legally binding agreement between two parties where one agrees to provide a specified service to the other for a payment.

SEC

The U.S. Securities and Exchange Commission, a federal agency that regulates the securities markets and protects investors.

Revenue Recognition Criteria

The set of guidelines that determines the specific conditions under which revenue is recognized in the accounting period.