Cost of the asset$100,000
Life of the asset 5 years
Depreciation rate20%
Capital cost allowance rate 50%
Residual value of the asset nil
Income tax rate 50%
-How is profit for the year calculated?
A) by deducting operating expenses from profit before taxes
B) by deducting cost of sales from profit before taxes
C) by deducting cost of sales from revenue
D) by deducting income tax expense from profit before taxes

Question

Cost of the asset$100,000 
Life of the asset 5 years 
Depreciation rate20% 
Capital cost allowance rate 50% 
Residual value of the asset nil 
Income tax rate 50%
-How is profit for the year calculated?
A) by deducting operating expenses from profit before taxes
B) by deducting cost of sales from profit before taxes
C) by deducting cost of sales from revenue
D) by deducting income tax expense from profit before taxes

Quizplus · Accepted Answer

Profit for the year is calculated by deducting income tax expense from profit before taxes. This is because profit before taxes represents the company's earnings before accounting for income tax expenses. Subtracting the income tax expense gives the net profit or net income for the year.

Cost of the Asset$100,000