Katt CoBegan Operations Two Years Ago (Year 1) and Recognized $37,000

Katt Co.began operations two years ago (Year 1) and recognized $37,000 in business income and $1,000 in taxable capital gains that year.Last year (Year 2) the company incurred a business loss of $25,000, a taxable capital gain of $2,000, and an allowable capital loss of $5,000.During the current year (Year 3) business income was $50,000, taxable capital gains were $4,000, and the company received $10,000 in dividends from a taxable Canadian corporation.Katt Co.utilizes any unused losses in the earliest years possible, Which of the following taxable incomes are correct after all carry-over adjustments have been made?

A) Year 1: $12,000; Year 2: $0; Year 3: $52,000
B) Year 1: $38,000; Year 2: ($28,000) ; Year 3: $64,000
C) Year 1: $13,000; Year 2: $0; Year 3: $61,000
D) Year 1: $37,000; Year 2: $0; Year 3: $27,000