Acai Corporation Determined That $5,000,000 of Its R&D Credit on Its

question 29

Short Answer

Acai Corporation determined that $5,000,000 of its R&D credit on its current year tax return was uncertain. Acai determined that there was a 40 percent chance of the credit being sustained on audit. Management made the following assessment of the company's potential tax benefit from the R&D credit and its probability of occurring. $\begin{array}{lll}\begin{array}{r}\text { Potential Estimated }\\\text { Benefit (000s) } \\\hline \$ \mathbf{5,0 0 0 , 0 0 0} \\\mathbf{3,50 0 , 0 0 0} \\\mathbf{2,00 0 , 0 0 0} \\0\end{array}\begin{array}{c}\text {Individual Probability}\\\text { of Occurring (\%) } \\\hline 05 \\15 \\35 \\25\\\end{array}\begin{array}{c}\text { Cumulative Probability } \\\text { of Occurring } \\\hline 05 \\20 \\55 \\100\end{array}\end{array}$ Under ASC 740, what amount of the tax benefit related to the R&D credit can Acai recognize in calculating its income tax provision in the current year?

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Definitions:

Intravenous Catheter

A tube inserted into a vein to provide venous access for the administration of fluids, medications, and nutrients.

Peripheral Intravenous Catheter

A device inserted into a peripheral vein, usually in the hand or arm, to administer medications or fluids.

Continuously Running IV

An intravenous line that delivers fluids, medication, or nutrition without interruption.

Over-The-Needle Catheter (ONC)

A medical device used to access veins for the delivery of medications or fluids, consists of a needle with a catheter sheathed over it.