In the First Two Years of Operations, a Company Reports

question 62

Essay

In the first two years of operations, a company reports taxable income of $125,000 and $65,000, respectively. In the first two years, the company paid $50,000 and $13,000. It is now the end of the third year, and the company has a loss of $160,000 for tax purposes. The company carries losses to the earliest year possible. The tax rate is currently 25%.
Required:
Compute the amount of income tax payable or receivable in the current (third)year.

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Definitions:

Mutual Fund

An investment vehicle that pools money from many investors to purchase a diversified portfolio of stocks, bonds, or other securities.

Net Asset Values

The value of an entity's assets minus the value of its liabilities, often used in relation to investment funds.

Money Market Funds

Investment funds that invest in short-term debt securities, such as treasury bills and commercial paper, offering investors high liquidity with a relatively low level of risk.

Prime Institutional

High-quality services or investment products catered to large institutional investors, typically offering premier levels of performance and service.