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.

---

Definitions:

Discount

A reduction from the usual cost of something, usually provided as an incentive to increase sales.

Outstanding Balance

Outstanding Balance refers to the amount of money owed on a loan or credit that has not yet been repaid.

Invoice

A detailed bill provided by a seller to a buyer listing goods or services provided, alongside quantities and prices.

Terms

Conditions and stipulations outlined in an agreement or contract that specify the rights and obligations of the parties involved.