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Appalachian Airlines began operating in 2010. The company lost money the first year but has been profitable ever since. The company's taxable income (EBT) for its first five years is listed below. Each year the company's corporate tax rate has been 40%.

Year Taxable Income
2010 −$4,000,000
2011 $1,000,000
2012 $2,000,000
2013 $3,000,000
2014 $5,000,000


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 2010.
How much did the company pay in taxes in 2013?

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Respuesta :

Answer:

$800,000

Explanation:

The computation of the taxes paid by the company in 2013 is shown below:

Year    Taxable Income         Carry forward amount        Year-end amount

2010    -$4,000,000                                                            $0

2011      $1,000,000               - $4,000,000                        $3,000,000

2012     $2,000,000              -$3,000,000                         $1,000,000

2013     $3,000,000              -$1,000,000                          $2,000,000

Now the tax paid is

= $2,000,000 × 40%

= $800,000

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