Operating income and tax rates for C>J. Co for the first three years of operatio

Question

Operating income and tax rates for C>J. Co for the first three years of operations were as follows:

Income Enacted tax rate
2010 $100,000. 35%
2011 ($250,000.) 30%
2012 $420,000. 40%

Assume that Cj, opts to carryback its 2011 NOL, what is the amount of income tax payable at Dec 31, 2012?

a)  $68,000.
b) $168,000.
c) $123,000.
d) $108,000.

Assume that C.J. Co opts only to carryforward  its 2011 NOL, what is the amount of deferred tax asset or liability  that C.J. Co would report on its December 31, 2011 balance sheet?

 Amount                 Def. tax asset or liability

a)  $75,000           Deferred tax liability

b) $87,500            Deferred tax liability

c) $100,000          Deferred tax asset

d)  $75,000           Deferred tax asset

Explanation / Answer

$68,000 ($420,000 - $250,000) x 40% = $68,000

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