If Net Income is 370 and tax rate is 40%. What is the amount of Income before taxes? Round the answer to nearest dollar.

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BlackTom AI · Accepted Answer

We start by identifying what Net Income represents in relation to Income Before Taxes (IBT) with a given tax rate. If tax rate is 40%, then taxes equal 0.40 × IBT, and Net Income equals IBT minus taxes, which is IBT − 0.40×IBT = 0.60×IBT.

Option a) 617: If IBT × 0.60 = Net Income, then IBT = Net Income / 0.60 = 370 / 0.60 ≈ 616.67, which rounds to 617 dollars. This aligns with the calculation.

Option b) 148: If IBT were 148, then Net Income would be 0.60 × 148 = 88.8, far from the given 370. This shows a discrepancy and demonstrates why 148 cannot be correct.

Option c) 247: If IBT were 247, Net Income would be 0.60 × 247 = 148.2, again not equal to 370. The result clearly indicates this option is incorrect.

Option d) 222: If IBT were 222, Net Income would be 0.60 × 222 = 133.2, which is not 370 either. This option also fails the given condition.

In summary, since Net Income equals 60% of the Income Before Taxes, solving 0.60 × IBT = 370 yields IBT ≈ 616.67, which rounds to 617. Therefore the correct choice corresponds to the option stating 617, while the others do not satisfy the relationship Net Income = 0.60 × IBT.

ACCT 3380 R10 SPRING 2025 Module 3: Practice Questions, Due Sunday 11PM

If Net Income is 370 and tax rate is 40%. What is the amount of Income before taxes? Round the answer to nearest dollar.

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