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Last year the first $ 30,000 of each Country X resident's

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Last year the first $ 30,000 of each Country X resident's [#permalink] New post 24 Feb 2012, 22:27
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91% (02:28) correct 9% (01:46) wrong based on 55 sessions
Last year the first $ 30,000 of each Country X resident's annual taxable income was taxed at the rate of 15 percent, and taxable income in excess of $ 30,000 was taxed at a rate of 27 percent. If Mr. Smith was a resident last year, was all of his taxable income taxed at the 15 percent rate?

(1) Last year Mr. Smith's tax, based on his taxable income, was $ 3,750.

(2) If Mr. Smith's taxable income had been twice as much as it was, his tax would have been $ 9,900.
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Re: PT #8 DS 15 [#permalink] New post 25 Feb 2012, 00:00
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Last year the first $ 30,000 of each Country X resident's annual taxable income was taxed at the rate of 15 percent, and taxable income in excess of $ 30,000 was taxed at a rate of 27 percent. If Mr. Smith was a resident last year, was all of his taxable income taxed at the 15 percent rate?

Basically the question asks whether Mr. Smith's income was less than or equal to $30,000. Also notice that for $30,000 tax is $30,000*0.13=$4,500.

(1) Last year Mr. Smith's tax, based on his taxable income, was $ 3,750. Since the tax was less than $4,500 then the income was less than $30,000. Sufficient.

(2) If Mr. Smith's taxable income had been twice as much as it was, his tax would have been $ 9,900. From $9,900, $4,500 was paid on $30,000 and the rest $5,400 were paid on an additional income (income over $30,000) at a rate of 27%. Additional income would be: x*0.27=$5,400 --> x=$20,000. So, if Mr. Smith's taxable income had been twice as much it would be $30,000+$20,000=$50,000, so his actual income is $50,000/2=$25,000. Sufficient.

Answer: D.

Hope it's clear.
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Re: PT #8 DS 15   [#permalink] 25 Feb 2012, 00:00
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Last year the first $ 30,000 of each Country X resident's

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