JR Company Incurred a Loss in 2011,due in Part to a Fire

question 64

Multiple Choice

JR Company incurred a loss in 2011,due in part to a fire at one of its plants.The deferred benefit of a loss carry forward was not recognized in the year as the probability of realization was less than 50%.In 2012,JR Company incurred a small loss,but due to large contracts upcoming,it was determined that the probability of realization was greater than 50%.The tax rate for 2011 was 40% and 2012 45%.JR Company should:

• A) Record the deferred income tax benefit for 2012 only.
• B) Record the deferred income tax benefit for both years using the 40% rate.
• C) Record the deferred income tax benefit for both years using the 45% rate.
• D) Record the deferred income tax benefit for 2011 only.

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Definitions:

White Collar Crime

A category of non-violent crime, typically committed by individuals in higher social or professional positions, involving financial deception or fraud.

Corporate Tax Evasion

The illegal practice of deliberately avoiding paying the rightful amount of taxes by corporations, often through dishonest reporting or other means.

Insider Trading

The trading of a public company's stock or other securities (such as bonds or stock options) by individuals with access to non-public, material information about the company.

Distributive Justice

The perceived fairness of outcomes distributed among members of a group, including resources, rewards, and responsibilities.