Lancaster Inc expects to have taxable income of $275,000 for 2016 and a tax credit of $12,250 . Assume that the graduated tax rate schedule is as follows:

$1-$100,000 15%
$100,001-200,000 22%
$200,001-460,000 28% + 5% surtax
$460,001 and above 30%

Required:

Determine the tax expense for the first quarter, assuming that taxable income is $65,000 .

Estimated annual tax:

$100,000 x .15 $15,000
100,000 x .22 22,000
75,000 x .33 24,750

$61,750
Tax credit (12,250)
Total tax $49,500

Effective rate = $49,500 ÷ $275,000 = 18%

First-quarter tax expense = $65,000 x .18 = $11,700