In 2019, T Corporation changed its tax year from ending each April 30 to ending each December 31.The corporation earned $60,000 during the period May 1, 2019 through December 31, 2019.The annualized income for the short year is $90,000.

Question

Quizplus · Accepted Answer

The annualized income is calculated by taking the income earned during the short period and extrapolating it to a full year. Since the corporation earned $60,000 from May 1, 2019, to December 31, 2019 (8 months), annualizing this would mean calculating the income as if it were earned over 12 months. The calculation is $60,000 / 8 months * 12 months = $90,000, making the statement true.

In 2019, T Corporation Changed Its Tax Year from Ending