ChocoHealth Inc.is developing new chocolate products providing abundant health benefits at low calorie counts.For the past three years,it spent an average of $500,000 per year on research.This year ChocoHealth has spent $900,000 on research.The company has elected the simplified credit.For the current year,it will earn a research credit of
A)$54,000.
B)$126,000.
C)$80,000.
D)$91,000.

Question

Quizplus · Accepted Answer

To calculate the research credit, we need to first determine the base amount, which is the average annual gross receipts of the past four years multiplied by 50%. 
Base amount = (average annual gross receipts for 3 years prior to current year) x 50% 
Base amount = ($500,000 x 3) / 3 x 50% = $250,000

Next, we need to determine the qualified research expenses (QREs) for the current year. 
QREs = $900,000

The simplified credit is calculated as 14% of the excess of current year's QREs over the base amount. 
Simplified credit = 14% x ($900,000 - $250,000) = $91,000

Therefore, the answer is D, and ChocoHealth Inc. will earn a research credit of $91,000 for the current year.