Warren Corporation Began Operations in 2008 and Had Operating Losses

question 25

Multiple Choice

Warren Corporation began operations in 2008 and had operating losses of $400,000 in 2009 and $300,000 in 2010. For the year ended December 31, 2011, Warren had a pretax financial income of $600,000. For 2009 and 2010, assume an enacted tax rate of 30 percent, and for 2011 a 35 percent tax rate. There were no temporary differences in any of the years. In Warren's 2011 income statement, how much should be reported as income tax expense?

• A) $0
• B) $30,000
• C) $180,000
• D) $210,000

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Definitions:

Deductive Reasoning

A logical process in which a conclusion follows necessarily from given premises; moving from general statements to specific conclusions.

Conventional Level

The second level in Kohlberg's theory of moral development, where individuals make moral decisions based on conforming to social rules to ensure positive relationships and societal order.

Social Rules

Norms established by a society to dictate acceptable behavior, facilitate interaction, and maintain order among its members.

Preoperational Stage

A stage in Jean Piaget's theory of cognitive development (roughly ages 2 to 7) where children begin to engage in symbolic play and struggle with logic and taking the perspective of others.