In the First Year of Operations,a Company Reports Taxable Income

question 67

Essay

In the first year of operations,a company reports taxable income of $125,000 and paid $31,250 of income taxes.It is now the end of the second year,and the company has a loss of $175,000 for tax purposes.The company's management believes it is probable the company will be able to use up its tax losses.The tax rate is currently 40%.
Requirement:
Compute the amounts of income tax receivable and/ or deferred income tax asset in the current (second)year.

Recognize the structure and purpose of the general ledger.

Grasp the significance of normal balances for different types of accounts.

Comprehend the objective and process of preparing a trial balance.

Understand the utility of T-accounts in accounting.

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Definitions:

Federal Budget Deficits

The financial situation where the government's expenditures surpass its revenues within a specified fiscal period.

Reagan Administration

The executive branch of the U.S. government led by President Ronald Reagan from 1981 to 1989, known for its conservative policies, including tax cuts and deregulation.

Fiscal Policy

Governmental actions related to changes in taxation and spending levels intended to influence economic activity.

Business Cycle

The natural rise and fall of economic growth that occurs over time, consisting of periods of expansion, peak, contraction, and trough.