Reference no: EM132692003

Ross Corp.'s first year of operations was 20X2. Income for the following five years is reported below. There are no temporary or permanent differences during these five years. Ross's policy regarding the application of carryback losses is to maximize the recovery of past taxes paid.

Year     Accounting and taxable income (loss)       Tax rate

20X3               $200,000                                           40%

20X4              $192,000                                             45%

20X5             $210,000                                               35%

20X6             $185,000                                                40%

20X7              ($475,000)                                             30%

Problem 1: What amount should Ross record for the income tax expense (recovery) for the year 20X7?

a) $183,500

b) $189,100

c) $194,700

d) $195,450