Bradshaw Beverages began operations in 2007. 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 2007. How much did the company pay in taxes during 2011?
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 2011, the taxable income would be reduced by the carried-forward losses, and the tax would be calculated on the remaining taxable income at a 40% rate.

Bradshaw Beverages Began Operations in 2007