Before Considering a Net Operating Loss Carryforward of $80 Million

question 43

Multiple Choice

Before considering a net operating loss carryforward of $80 million, Fama Corporation reported $200 million of pretax accounting and taxable income in the current year. The income tax rate for all previous years was 40%. On January 1 of the current year, a new tax law was enacted, reducing the rate to 30% effective immediately. Fama's income tax payable for the current year would be:

• A) $48 million.
• B) $28 million.
• C) $60 million.
• D) $36 million.

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Definitions:

Generally Accepted Auditing Standards (GAAS)

The principles auditors must adhere to while conducting audits on companies' financial statements.

Professional Care

The provision of services that meet the standards of practice within a specific profession, particularly in healthcare, legal, or financial services.

Auditor

A professional who examines and evaluates the financial statements of an entity to ensure accuracy and compliance with accounting standards.

Accountant-Client Privilege

A legal principle protecting communications between a client and their accountant from being disclosed without the client's permission.