At the End of 2020, Its First Year of Operations

question 32

Multiple Choice

At the end of 2020, its first year of operations, Gaucho Corp. prepared the following reconciliation between pre-tax accounting income and taxable income: $$\begin{array} { l r } \text { Pre-tax account ing income } & \$ 800,000 \\\text { Estimated lawsuit expense } & 400,000 \\\text { Excess CCA for tax purposes } & ( 900,000 ) \\\text { Taxable income } & \$ 300,000\end{array}$$ The estimated lawsuit expense of $ 400,000 will be deductible in 2021 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $ 300,000 in each of the next three years. The income tax rate is 25% for all years. Gaucho adheres to IFRS requirements. The deferred tax asset to be recorded is

• A) $ 200,000.
• B) $ 160,000.
• C) $ 100,000.
• D) $ 60,000.

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Definitions:

Larynx

The voice box or the organ located in the upper part of the respiratory tract, instrumental in breathing, producing sound, and protecting the trachea against food aspiration.

Sex Hormone

Hormones that play critical roles in the regulation of sexual function, reproductive processes, and secondary sexual characteristics.

Androgen

A group of hormones that play a role in male traits and reproductive activity; present in both males and females.

Growth Spurt

A rapid period of growth in height and weight, typically occurring during puberty.