In the First Two Years of Operations, a Company Reports

question 35

Essay

In the first two years of operations, a company reports taxable income of $115,000 and $165,000, respectively. In the first two years, the tax rates were 38% and 32% respectively. It is now the end of the third year, and the company has a loss of $160,000 for tax purposes. The company carries losses to the earliest year possible. The tax rate is currently 25%.
Required:
a. How much tax was paid in year 1 and year 2?
b. Compute the amount of income tax payable or receivable in the current (third)year.

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Definitions:

Internal Activity

Tasks, operations, or works conducted within an organization or entity, often as opposed to interactions with external parties.

SCM

Supply Chain Management; the oversight of materials, information, and finances as they move from supplier to manufacturer to wholesaler to retailer to consumer.

Return Component

The part of an investment's total return that results from the gain or loss in the value of the investment.

Received Defective

Term used when goods or products are received in a damaged or malfunctioning state from a supplier or during shipping.