Learn how to calculate forecasted income tax expenses based on forecasted net income before taxes.
- [Instructor] Let's talk about tax expense.…Tax expense deals with the tax rate…and even though the marginal tax rate may be variable…based on your revenue, let's pretend…that the average tax rate is about 35%…including state and federal taxes.…Now the fact of the matter is that this number…will vary tremendously, and as you very well may know,…there are several large corporations…who pay little to nothing in taxes.…Also, there are several small budding businesses…who show operating losses, and they also pay very little.…
So neither of these are our scenarios at Richard's,…so we'll have to forecast tax expense.…There are two places where we need to make this calculation.…I recommend making it in the income statement first.…So, I'm going to start off in 03_06_IS_Begin…from the exercise files.…This is very easy to do.…All you have to do to get the tax expense…is simply multiply the income before taxes by 35%.…So let's do that.…Starting off in cell G25, I'm going to say equals…income before taxes, multiplied by .35.…
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