Scott Inc Expects to Have Financial Income of $375,000 for 20X1

Essay

Scott Inc. expects to have financial income of $375,000 for 20X1 and estimates annual tax credits of $22,500. Included in Scott's income is interest income on municipal securities totaling $45,000 and meals and entertainment expenses of $62,500 of which 50% are not deductible under current tax code. Assume that the graduated tax rate schedule is as follows:
Required:
Determine the tax expense for the first quarter, assuming that taxable income is $85,000.