Reference no: EM132656058

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