question archive Andy's Autos Inc
Andy's Autos Inc
Subject:FinancePrice:2.88 Bought19
Andy's Autos Inc. had a negative pretax income of ($400,000) in 2016, their first year in business. Luckily they were able to generate a pretax profit of $700,000 in 2017, and use their entire tax loss carry forward. Assuming they were in the 30% effective tax rate bracket, how much tax did they have to pay in 2017?
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Since they can use their entire tax loss carry forward, last year's loss of -$400,000 will be adjusted in current year
Therefore, the curretn yera pretax profit after adjustment becomes $300,000 ($700,000-$400,000)
Tax @30% on $300,000 = $90,000
Thus, the pay $90,000 in 2017
