PP Ltd., a client of your firm, has a November 30 year end and has requested you to advise them on what its monthly instalments for the 2020 tax year will be. Its taxes payable for its November 30, 2018 and November 30, 2019 years were $13,800 and $13,200, respectively. Its estimated taxes payable for the November 30, 2020 year are $14,400. PP Ltd. wants to pay the lowest amount possible, without incurring interest penalties. What would its instalments be?
A)Twelve payments at $1,200 per month.
B)Twelve payments at $1,100 per month.
C)Twelve payments at $1,150 per month.
D)Two monthly payments at $1,200 each, followed by ten monthly payments at $1,140 each.
E)None of the above.

Question

Quizplus · Accepted Answer

The lowest monthly instalment amount without incurring interest penalties would be based on the lowest of the previous years' taxes payable. For PP Ltd., the lowest taxes payable in the previous years was $13,200 for the year ending November 30, 2019. Dividing this amount by 12 months gives $1,100 per month.

PP Ltd, a Client of Your Firm, Has a November 30