HB Company is a private company with a significant amount of long-term debt. The company reports under
Question:
HB Company is a private company with a significant amount of long-term debt. The company reports under IFRS. One of the conditions of the debt-financing indenture is that it must provide quarterly financial statements to the lender. HB pays tax at the rate of 25% on the first $200,000 of income and 40% on any income in excess of $200,000. During 20X5, the company earned $500,000 and paid tax at an average rate of 34.545%. Similar results were expected for 20X6.
HB realized the following actual results for the year ended December 31, 20X6 (in thousands):
Quarter Income (loss)
1 $100
2 (150)
3 200
4 400
Required:
Calculate income tax expense (recovery) for each quarter in 20X6 and for the year in total under the:
a. Discreet approach
b. Integral approach
Smith and Roberson Business Law
ISBN: 978-0538473637
15th Edition
Authors: Richard A. Mann, Barry S. Roberts