Question
Salinger Software was founded in 2015. The company lost money each of its first three years,...
Salinger Software was founded in 2015. The company lost money each of its first three years, but was able to turn a profit in 2018. Salinger's operating income (EBIT) for its first four years of operations is reported below.
| Year | EBIT |
| 2015 | -$100,000,000 |
| 2016 | -$150,000,000 |
| 2017 | -$100,000,000 |
| 2018 | $700,000,000 |
The company has no debt, so operating income equals earnings before taxes. The corporate tax rate has remained constant at 35%. Assume that the company took full advantage of the carry-back, carry-forward provisions in the Tax Code, and assume that the current provisions were applicable in 2015. How much tax did the company pay in 2018?
a $132,300,000
b $122,500,000
c $121,275,000
d $135,975,000
e $101,675,000
Homework Answers
Answer #1
Solution
Correct answer- Option B $122,500,000
Since the tax can be carried forward therefore the -ive tax of 2015 to 2017 must be carried forward to 2018 to take full advantage in 2018
Tax calculation for 2015 to 2017
Excel formula
Now The tax carried forward to 2018 is -122500000
Tax for 2018=700000000*.35=245000000
Since we have tax carried forward from 2015-2017 therefore the tax payable in 2018=Tax due for 2018+Tax carried forward=245000000-122500000
=122500000
If you are satisfied with the answer,please give a thumbs up
Not the answer you're looking for?
Similar Questions
30. Power Inc. began operating in 2015. The company lost money the first year but has...
30. Power Inc. began operating in 2015. The company lost money
the first year but has been profitable ever since. The company’s
taxable income (EBT) for its first four years is listed below. Each
year the company’s corporate tax rate has been 40 percent. Year
Taxable Income 2015 $30,000 2016 -$70,000 2017 $20,000 2018 $30,000
Assume that the company has taken full advantage of the Tax Code’s
carry-back, carry-forward provisions and that the current
provisions were applicable in 2015 through...
Collins Co. began operations in 2010. The company lost money the first two years, but has...
Collins Co. began operations in 2010. The company lost money the
first two years, but has been profitable ever since. The company's
taxable income (EBT) for its first four years is summarized
below:
Year
EBT
2010
−$3,000,000
2011
−$5,200,000
2012
$4,200,000
2013
$8,300,000
The corporate tax rate has remained at 34%. Assume that the company
has taken full advantage of the Tax Code's carry-back,
carry-forward provisions, and assume that the current provisions
were applicable in 2010. What is Collins' tax...
Blass Brothers lost money its first year of operation, but has been profitable ever since. Specifically,...
Blass Brothers lost money its first year of operation, but has
been profitable ever since. Specifically, its taxable income (EBT)
has been as follows:
Year
Taxable Income
2010
(1,000,000)
2011
100,000
2012
200,000
2013
500,000
2014
600,000
The company's tax rate is 40 percent. Assume that current carry
back and carry forward provisions were available in prior years.
What is the amount of tax the company paid in the most recent
year?
a.
$200,000
b.
$...
Bradshaw Beverages began operations in 2010. The table below contains the company's taxable income during each...
Bradshaw Beverages began operations in 2010. The table below
contains the company's taxable income during each year of its
operations. Notice that the company lost money in each of its first
three years. The corporate tax rate has been 40% each year. Year
Taxable Income 2010 ?$ 700,000 2011 ?$ 500,000 2012 ?$ 200,000 2013
$ 800,000 2014 $1,000,000 Assume that the company has taken full
advantage of the Tax Code's carry-back, carry-forward provisions,
and assume that the current provisions...
During its first four years of operation, Marigold Co. reported the following net income. 2015 $86,100...
During its first four years of operation, Marigold Co. reported
the following net income.
2015
$86,100
2016
138,900
2017
169,000
2018
238,500
Marigold is undergoing its first financial statement audit. The
external auditors noted the following:
1. In early 2018, Marigold Co. changed its
estimate of bad debt expense from 2.5% of sales to 2.0% of sales.
The company therefore adjusted its net income upward for 2015
through 2017 by the following amounts.
2015
$2,100
2016
3,900
2017
5,400
2....
Below are the reported profits and losses of Amherst Company for the past several years along...
Below are the reported profits and losses of Amherst Company for
the past several years along with their tax rates on income
reported.
Income
Tax rate
2014
$100,000
35%
2015
$
20,000
40%
2016
$100,000
35%
2017
$(250,000)
35%
2018
$85,000
21%
2019
unknown
21%
Amherst elects to use both carry back and carry forward
procedures with no valuation allowance and strongly anticipates
future profits to recover losses.
Record the tax effect of the above in 2017.
Dr....
The pretax financial income (or loss) figures for Indigo Company are as follows. 2015 $164,000 2016...
The pretax financial income (or loss) figures for Indigo Company
are as follows.
2015
$164,000
2016
275,000
2017
86,000
2018
(164,000
)
2019
(390,000
)
2020
113,000
2021
98,000
Pretax financial income (or loss) and taxable income (loss) were
the same for all years involved. Assume a 25% tax rate for 2015 and
2016 and a 20% tax rate for the remaining years.
Prepare the journal entries for the years 2017 to 2021 to record
income tax expense and the...
The pretax financial income (or loss) figures for Skysong Company are as follows. 2015 $144,000 2016...
The pretax financial income (or loss) figures for Skysong
Company are as follows. 2015 $144,000 2016 225,000 2017 72,000 2018
(144,000 ) 2019 (342,000 ) 2020 108,000 2021 90,000 Pretax
financial income (or loss) and taxable income (loss) were the same
for all years involved. Assume a 45% tax rate for 2015 and 2016,
and a 20% tax rate for the remaining years. Prepare the journal
entries for the years 2017 to 2021 to record income tax expense and
the...
Firenze Company developed a specialized banking application software program that it licenses to various financial institutions...
Firenze Company developed a specialized banking application
software program that it licenses to various financial institutions
through multiple-year agreements. On January 1, 2018, these
licensing agreements have a fair value of $827,500 and represent
Firenze's sole asset. Although Firenze currently has no
liabilities, the company has a $122,000 net operating loss (NOL)
carryforward because of recent operating losses.
On January 1, 2018, Parma, Inc., acquired all of Firenze's
voting stock for $995,000. Parma expects to extract operating
synergies by integrating...
Firenze Company developed a specialized banking application software program that it licenses to various financial institutions...
Firenze Company developed a specialized banking application
software program that it licenses to various financial institutions
through multiple-year agreements. On January 1, 2018, these
licensing agreements have a fair value of $780,000 and represent
Firenze's sole asset. Although Firenze currently has no
liabilities, the company has a $160,000 net operating loss (NOL)
carryforward because of recent operating losses.
On January 1, 2018, Parma, Inc., acquired all of Firenze's
voting stock for $950,000. Parma expects to extract operating
synergies by integrating...
ADVERTISEMENT
Need Online Homework Help?
Get Answers For Free
Most questions answered within 1 hours.
ADVERTISEMENT
Active Questions
asked 5 minutes ago
asked 14 minutes ago
asked 30 minutes ago
asked 30 minutes ago
asked 41 minutes ago
asked 41 minutes ago
asked 56 minutes ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago
asked 1 hour ago