[wickedrentlover]

From the Becker software:

The pretax financial income and taxable income of Zeus Corporation were the same for the following years (i.e., there were no permanent or temporary differences):

Income Tax Rate

Year 4 $20,000 30%

Year 5 15,000 25%

Year 6 (100,000) 25%

Year 7 70,000 40%

What amount of income tax benefit will Zeus Corporation record in Year 6 under U.S. GAAP, assuming Zeus elects to use the 2-year carryback/20-year carryforward option and it is more likely than not that there will be no taxable earnings after Year 7?

a. $9,750

b. $11,750 (correct answer)

c. $24,000

d. $26,000

Question explanation to follow.

REG (2/24/12) - 89
AUD (4/5/12) - 89
FAR (5/31/12) - 91
BEC (7/7/12) - 84

[wickedrentlover]

ugh, of course my post didn't format correctly. There should be 3 columns, with the year, income, and tax rate.

The answer explains how to determine the refund, which I get. But then it says the remaining $65,000 of carryforward is used to calculate the valuation allowance as follows:

Carryforward $65,000

Less Y7 income (5,000)

My question is, how did they get the $5,000 for year 7 income?? The only way I can think of is that it's the excess income after the remaining Y6 loss is deducted.

Also, if the entire remaining Year 6 loss can be covered by the Year 7 income, why do we even need a valuation allowance?

REG (2/24/12) - 89
AUD (4/5/12) - 89
FAR (5/31/12) - 91
BEC (7/7/12) - 84

[wickedrentlover]

Seriously, my test is tomorrow at 8am…if anyone can help with this then I would REALLY appreciate it…

REG (2/24/12) - 89
AUD (4/5/12) - 89
FAR (5/31/12) - 91
BEC (7/7/12) - 84

[misanthrope87]

Which specific question is this on the software?

B 2/12 87
A 11/11 90
R 8/11 86
F 5/12 88

[wickedrentlover]

It's in the Final Review software…I looked for a number like CPA-xxxxx but couldn't find it 🙁 What other information do you need? I can pull it back up from my end and type anything else from the explanation.

REG (2/24/12) - 89
AUD (4/5/12) - 89
FAR (5/31/12) - 91
BEC (7/7/12) - 84

[misanthrope87]

Just don't get it and was wonder if there's something else to it. I thought it would be A. But I can't seem to find that question anywhere in Becker. I'm using 2012, I thought you were too.

B 2/12 87
A 11/11 90
R 8/11 86
F 5/12 88

[wickedrentlover]

I am, but since I was the classroom assistant I also got the separate Final Review materials they offer. The question came from those materials.

REG (2/24/12) - 89
AUD (4/5/12) - 89
FAR (5/31/12) - 91
BEC (7/7/12) - 84

[misanthrope87]

Ohh I thought you meant final exam. Got it. Sorry I can't be of any help. :/

B 2/12 87
A 11/11 90
R 8/11 86
F 5/12 88

[wickedrentlover]

That's okay, thanks anyway 🙂

REG (2/24/12) - 89
AUD (4/5/12) - 89
FAR (5/31/12) - 91
BEC (7/7/12) - 84

[momto5]

I seem to remember that question and thinking it might be incorrect. I'll see if I can find something on that one…..

FAR - 92 (4/27/12)
AUD - 96 (7/17/12)
BEC - 92 (8/30/12)
REG - 91 (11/12/12)

[Nbkna2c]

Agree do not know how they got the $5000

BEC 78
REG 84
AUD 76
FAR 83

[momto5]

Well, I guess I am not much help. I looked at it again, and at the explanation, and it still doesn't make sense to me. I don't know why they reference Year 7 income as $5,000. If it was, then it would make perfect sense, which leads me to believe that maybe the $70,000 income for year 7 is incorrect in this question. ???? I tend to agree with your assessment of the question. Good luck!

FAR - 92 (4/27/12)
AUD - 96 (7/17/12)
BEC - 92 (8/30/12)
REG - 91 (11/12/12)

[Author]

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