What Is the Income Tax Payable Under the Deferral Method

question 19

Multiple Choice

What is the income tax payable under the deferral method for F2014? $$\begin{array} { | l | r | r | r | } \hline & \text { F2013 } & \text { F2014 } & \text { F2015 } \\\hline \text { Income before tax } & 120,000 & 110,000 & 120,000 \\\hline \text { Taxable income } & 85,000 & 95,000 & 105,000 \\\hline \text { Tax rate } & 30 \% & 25 \% & 30 \% \\\hline\end{array}$$

• A)$23,750
• B)$25,500
• C)$27,500
• D)$36,000

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Definitions:

Fixed Charge Coverage Ratio

This ratio measures a company's ability to cover its fixed charges, such as interest and leases, with its earnings before interest and taxes.

EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization, a measure of a company's overall financial performance.

Loan Agreements

Contracts between a borrower and a lender outlining the terms and conditions of a loan.

Net Income

Net income is the total profit of a company after all expenses, including taxes and costs, have been subtracted from total revenue.