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 from the relationship between net income, taxes, and earnings before taxes (EBT). Net income = EBT × (1 − tax rate).
Here, net income (NI) = 370 and tax rate = 40% (0.40). So NI = EBT × 0.60.
To solve for EBT, EBT = NI / 0.60 = 370 / 0.60 = 616.666..., which rounds to 617 when rounding to the nearest dollar.
Now evaluate the options by applying the reverse calculation to see which one aligns with NI = 370 after tax:
- Option a: 617 for EBT implies after-tax income = 617 × 0.60 = 370.2, which rounds to 370, matching NI after rounding.
- Option b: 148 for EBT would yield after-tax = 148 × 0.60 = 88.8, far from 370.
- Option c: 247 for EBT would yield after-tax = 247 × 0.60 = 148.2, not 370.
- Option d: 222 for EBT would yield after-tax = 222 × 0.60 = 133.2, also not 370.
The calculation shows that only an EBT around 616.7 produces NI of 370 when taxed at 40%, and after rounding, 617 is the match. The other options would produce much smaller net incomes post-tax, inconsistent with NI = 370.

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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