XYZ IncIs a Publicly Traded Company

question 9

Multiple Choice

XYZ Inc.is a publicly traded company.At the start of the current year, the company had tax loss carry forwards in the amount of $500,000.This amount increased by $100,000 during the year, due to a change in estimate of the company's future earnings targets.The tax rate for the current year is 25%.The enacted tax rate for future years is 20%.The company uses a valuation allowance account to track its tax loss carry forwards.Which of the following correctly describes the balances in XYZ's internal records at the end of the current year?

• A)Deferred Tax Asset- Carry forward: $125,000 Dr.Valuation Allowance: $25,000 Cr.
• B)Deferred Tax Asset- Carry forward: $100,000 Dr.Valuation Allowance: $20,000 Dr.
• C)Deferred Tax Asset- Carry forward: $125,000 Dr.Valuation Allowance: $25,000 Dr.
• D)Deferred Tax Asset- Carry forward: $100,000 Dr.Valuation Allowance: $20,000 Cr.

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Definitions:

Yearning

A deep and intense longing or desire, often for something that one has lost or cannot have.

Reorganization

The process of changing the structure or arrangement of something, typically aiming for increased efficiency or to adapt to new conditions.

Attachment

In psychology, a deep and enduring emotional bond that connects one person to another across time and space.

Human Instincts

Innate, biologically determined behavior patterns common to all humans, influencing reactions and interactions with the environment.