Coffee CoBegan Operations in 20x0 and Recognized $37,000 in Business Income

question 5

Multiple Choice

Coffee Co.began operations in 20x0 and recognized $37,000 in business income and $1,000 in taxable capital gains that year.In 20x1,the company incurred a business loss of $25,000,a taxable capital gain of $2,000,and an allowable capital loss of $5,000.Business income for 20x2 was $50,000,taxable capital gains were $4,000,and the company received $10,000 in dividends from a taxable Canadian corporation.Coffee Co.utilizes any unused losses in the earliest years possible,Which of the following taxable incomes are correct after all carry-over adjustments have been made?

• A)20x0: $12,000; 20x1: $0; 20x2: $52,000
• B)20x0: $38,000; 20x1: ($28,000); 20x2: $64,000
• C)20x0: $13,000; 20x1: ($0; 20x2: $61,000
• D)20x0: $37,000; 20x1: $0; 20x2: $27,000

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Definitions:

Mood-stabilizing Drug

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Lithium

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Bipolar Disorder

A psychological disorder marked by severe fluctuations in mood, ranging from manic or hypomanic episodes to depressive lows.

Psychosurgery

Surgical procedures that modify brain tissue in order to alleviate psychological disorders or behavioral problems.