In the First Year of Operations, a Company Reports Taxable

question 71

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%.
Required:
Compute the amounts of income tax receivable and/ or deferred income tax asset in the current (second)year.