During Its First Three Years of Operations a Company Reported

question 72

Multiple Choice

During its first three years of operations a company reported income before taxes of $1,000,000 in year 1, ($1,800,000) in year 2, and $3,000,000 in year 3. The income tax rate applicable to each of the years was 40%. Assume that there weren't any temporary differences and a valuation allowance was not necessary.
-What is the amount of the deferred income tax asset reported in the year 2 year-end balance sheet if the company elected a loss carryback?

• A)$720,000.
• B)$320,000.
• C)$400,000.
• D)$0.

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Definitions:

Cash Received

The actual receipt of cash from transactions, including sales, investments, financing, and other business activities.

Discount on Bonds Payable

The discrepancy between what a bond is actually worth and the lower price it is sold for.

Bonds Payable

A long-term debt instrument issued by corporations or governments, indicating the amount owed to bondholders, including the terms of interest payments and the maturity date.

Discount on Bonds Payable

The difference between the face value of bonds and their selling price, when the bonds are sold for less than their face value.