Question 1

A company had taxable income of $2 million in fiscal 2020 and paid taxes of .7 million; the company incurred a loss of $8 million in fiscal 2021 when the tax rate is 50%. How much refund is the company entitled to?

Accepted Answer

The company paid taxes of $0.7 million in fiscal 2020. With a loss of $8 million in fiscal 2021 and a tax rate of 50%, the company can carry back the loss to offset the taxable income of the previous year, entitling them to a refund of the taxes paid in 2020, which is $0.7 million.

Question 2

A company had taxable income of $12 million in fiscal 2019 and paid taxes of 4.8 million; the company incurred a loss of $7 million in fiscal 2020 when the tax rate is 50%. How much refund is the company entitled to?

Accepted Answer

The company paid taxes of $4.8 million on its taxable income of $12 million in fiscal 2019, which implies a tax rate of 40% ($4.8 million / $12 million). In fiscal 2020, the company incurred a loss of $7 million. If the company can carry back this loss to offset its previous year's taxable income, it could apply the 40% tax rate to the $7 million loss, resulting in a potential refund of $2.8 million (40% of $7 million).

Question 3

Explain why a company should carry back losses and why a company might choose to carry losses forward instead.

Accepted Answer

The answer of Explain why a company should carry back...

Question 4

Which statement is true?

Accepted Answer

IAS 12 prohibits the discounting of deferred tax assets and liabilities. The rationale behind this decision includes considerations of the costs and benefits of discounting, as well as the desire to maintain comparability among different enterprises. Discounting would introduce complexity and require assumptions about future events, which could reduce comparability.

Question 5

State whether or not discounting of deferred assets and liabilities is required or permitted and explain why or why not.

Accepted Answer

The answer of State whether or not discounting of deferred...

Question 6

A company had taxable income of $2 million in fiscal 2020 and paid taxes of 0.6 million; the company incurred a loss of $7 million in fiscal 2021 when the tax rate is 50%. How much refund is the company entitled to?

Accepted Answer

The company paid taxes of $0.6 million in fiscal 2020 on its taxable income. With a loss of $7 million in fiscal 2021 and a tax rate of 50%, it can carry back the loss to offset the previous year's taxable income, entitling it to a refund of the taxes paid, which is $0.6 million.

Question 7

A company had taxable income of $2 million in fiscal 2019 and paid taxes of 0.4 million; the company incurred a loss of $0.5 million in fiscal 2021 when the tax rate is 30%. How much refund is the company entitled to?

Accepted Answer

The answer of A company had taxable income of $2...

Question 8

In the first two years of operations, a company reports taxable income of $115,000 and $165,000, respectively. In the first two years, the tax rates were 38% and 32% respectively. 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:
a. How much tax was paid in year 1 and year 2?
b. Compute the amount of income tax payable or receivable in the current (third)year.

Accepted Answer

The answer of In the first two years of operations,...

Question 9

A large public company reported that its provision for income taxes was $500 million and that it has a deferred tax liability of 2 billion. A Member of Parliament calls you and says, "I see hundreds of companies who have these huge deferred tax liabilities on their balance sheets. If the government could get even half of what's owed, it could cut the public deficit down to size in a hurry."
Required:
Write a memo to the Member of Parliament explaining the issues.

Accepted Answer

The answer of A large public company reported that its...

Question 10

In the first two years of operations, a company reports taxable income of $125,000 and $165,000, respectively. In the first two years, the tax rates were 44% and 48% respectively. It is now the end of the third year, and the company has a loss of $260,000 for tax purposes. The company carries losses to the earliest year possible. The tax rate is currently 25%.
Required:
a. How much tax was paid in year 1 and year 2?
b. Compute the amount of income tax payable or receivable in the current (third)year.

Accepted Answer

The answer of In the first two years of operations,...

Question 11

In its first year of operations, a company reported taxable income of $200,000. In its second year the company incurred a $250,000 loss. During these first two years, the tax rates were 30% and 35% respectively. It is now the end of the third year, and the company a taxable income of $260,000. The company carries losses to the earliest year possible. The tax rate is currently 40%. The amount of income tax receivable or payable in the current (third)year is:

Accepted Answer

The company can carry back the $250,000 loss from the second year to offset the $200,000 income from the first year, resulting in a $50,000 loss carryforward to the third year. The taxable income for the third year is $260,000 - $50,000 = $210,000. At a 40% tax rate, the tax payable is $210,000 * 40% = $84,000. However, since the company had a tax refund of $60,000 from the first year (30% of $200,000), the net payable is $84,000 - $60,000 = $24,000. But since the question asks for the amount in the third year, the calculation should be $210,000 * 40% = $84,000, and the refund from the first year is not considered in the third year's payable. Therefore, the correct answer is $76,500 payable.

Question 12

Under ASPE, Section 3465 indicates less onerous disclosures as private enterprises are permitted to use the tax payable method. Summarize the rules covering presentation and disclosure of the following items according to ASPE using the following template:

Accepted Answer

The answer of Under ASPE, Section 3465 indicates less onerous...

Question 13

In the first year of operations, a company reports taxable income of $225,000 and paid a tax rate of 28%. It is now the end of the second year, and the company has a loss of $375,000 for tax purposes. The company's management believes it is probable the company will be able to use up its tax losses. The tax rate is currently 32%.
Required:
Compute the amounts of income tax receivable and/ or deferred income tax asset in the current (second)year.

Accepted Answer

The answer of In the first year of operations, a...

Question 14

In the first two years of operations, a company reports taxable income of $200,000 and $250,000, respectively. During these first two years, the tax rates were 30% and 35% respectively. It is now the end of the third year, and the company has a loss of $260,000 for tax purposes. The company carries losses to the earliest year possible. The tax rate is currently 40%. The amount of income tax receivable in the current (third)year is:

Accepted Answer

The company can carry back the $260,000 loss to offset the $200,000 taxable income from the first year, resulting in a tax refund of $60,000 (30% of $200,000). The remaining $60,000 loss can offset part of the $250,000 taxable income from the second year, resulting in an additional tax refund of $21,000 (35% of $60,000). The total tax receivable is $81,000 ($60,000 + $21,000).

Question 15

Summarize the IFRS rules for presentation and disclosure of taxes on discontinued operations and comprehensive income.

Accepted Answer

The answer of Summarize the IFRS rules for presentation and...

Question 16

In the first year of operations, a company reports taxable income of $125,000 and paid $31,250 of income taxes. It is now the end of the second year, and the company has a loss of $175,000 for tax purposes. The company's management believes it is probable the company will be able to use up its tax losses. The tax rate is currently 40%.
Required:
Compute the amounts of income tax receivable and/ or deferred income tax asset in the current (second)year.

Accepted Answer

The answer of In the first year of operations, a...

Question 17

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.

Accepted Answer

The answer of In the first two years of operations,...

Question 18

Match between columns
                        Premises: Arises from a transaction or event that affects both accounting income and taxable income but in different reporting periods.
A temporary difference that results in future taxable income being higher than accounting income.
Arises from a transaction or event that affects accounting income but never taxable income, or vice versa.
A temporary difference that results in future taxable income being less than accounting income.
The amount of income tax recoverable in future periods as a result of deductible temporary differences, losses carried forward, or tax credits carried forward.
The amount of income tax payable in future deferred tax liability periods as a result of taxable temporary differences.

Accepted Answer

The Answer of Deductible Temporary Difference and Permanent Difference and is...

Quiz 8: Accounting for Income Taxes

A company had taxable income of $2 million in fiscal 2020 and paid taxes of .7 million; the company incurred a loss of $8 million in fiscal 2021 when the tax rate is 50%. How much refund is the company entitled to?

A company had taxable income of $12 million in fiscal 2019 and paid taxes of 4.8 million; the company incurred a loss of $7 million in fiscal 2020 when the tax rate is 50%. How much refund is the company entitled to?

Explain why a company should carry back losses and why a company might choose to carry losses forward instead.

Which statement is true?

State whether or not discounting of deferred assets and liabilities is required or permitted and explain why or why not.

A company had taxable income of $2 million in fiscal 2020 and paid taxes of 0.6 million; the company incurred a loss of $7 million in fiscal 2021 when the tax rate is 50%. How much refund is the company entitled to?

A company had taxable income of $2 million in fiscal 2019 and paid taxes of 0.4 million; the company incurred a loss of $0.5 million in fiscal 2021 when the tax rate is 30%. How much refund is the company entitled to?

Under ASPE, Section 3465 indicates less onerous disclosures as private enterprises are permitted to use the tax payable method. Summarize the rules covering presentation and disclosure of the following items according to ASPE using the following template:

Summarize the IFRS rules for presentation and disclosure of taxes on discontinued operations and comprehensive income.

Match the following terms with their definitions.