Falcon Networks is a leading semiconductor company with operations in 17 differe
ID: 431363 • Letter: F
Question
Falcon Networks is a leading semiconductor company with operations in 17 different countries. Information about the company's taxes appears below:
Falcon Networks Components of 2012 Income Tax Expense (in millions of US$):
Current federal = $55.65
Current foreign = 83.85
Current state and local = 14.69
Total current taxes = $154.19
Deferred federal = $30.28
Deferred foreign = 23.89
Deferred state and local = 0
Total deferred = $54.17
Total income tax expense = $208.36
Note: Falcon Networks has no current liability due for taxes at the end of the current year and prior year.
Components of Income Before Tax
United States = $256.35
Foreign = 236.85
Total income before tax = $493.20
Using the information above, what is the federal effective tax rate for 2012?
35.00%
Correct Answer
33.52%**
42.25%
45.49%
How would you work this out? Please and Thank you.
Explanation / Answer
The answer = 33.52%
Explanation: Federal effective tax rate = income tax expense/income before tax
Total federal income tax expense = current federal+deferred federal
= 55.65+30.28
= $85.93
Income before tax (United States component) = $256.35
Thus federal effective tax rate = income tax expense/income before tax
= 85.93/256.35
= 33.52%
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