Bradshaw Beverages began operations in 2008. 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. 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 2008. How much did the company pay in taxes during 2012?
A) $160,000
B) $168,000
C) $176,400
D) $185,220
E) $194,481

Question

Quizplus · Accepted Answer

The company can carry forward its losses from the first three years to offset taxable income in subsequent profitable years. In 2012, the taxable income is $400,000. After applying the 40% tax rate, the tax liability is $160,000.

Bradshaw Beverages Began Operations in 2008