Theodore Enterprises had the following pretax income (loss) over its first three
ID: 2453135 • Letter: T
Question
Theodore Enterprises had the following pretax income (loss) over its first three years of operations:
For each year there were no deferred income taxes and the tax rate was 30%. In its 2012 tax return, Theodore elected a loss carry back. No valuation account was deemed necessary for the deferred tax asset as of December 31, 2012. What was Theodore's income tax expense for 2013?
$264,000
$354,000
$462,000
$198,000
Theodore Enterprises had the following pretax income (loss) over its first three years of operations:
Explanation / Answer
the correct answer is - $198,000
the tax benefit for the second year- 880,000*0.3= 264,000
tax for the third year- 1,540,000*0.3= $462,000
the difference is payment of tax in third year= 462,000- 264,000= $198,000
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