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.

---

Definitions:

Comarketing

Cooperative arrangement in which two businesses jointly market each other’s products.

Cobranding

Cooperative arrangement in which two or more businesses team up to closely link their names on a single product.

Affinity Program

Marketing effort sponsored by an organization that solicits involvement by individuals who share common interests and activities.

Relationship Management

Collection of activities that build and maintain ongoing, mutually beneficial ties with customers and other parties.