A CCPC will earn a profit of $200,000 in 2021. Included in the calculation of that profit is a deduction of $44624 as a reserve for the anticipated non-collection of certain accounts receivable (bad debts). The corporation has recently signed a new contract and anticipates that profits for the following year (2022) will be $700,000. The following tax rules are assumed to be applicable:



1, The taxpayer is given the choice of deducting or not deducting a reserve for bad debts in any particular year

2. The corporation pays tax at the rate of 15% on the first $500,000 of annual business income and 25% on income above that amount.

If the corporation chooses to not deduct the reserve in 2021, and instead deduct it in 2022, how much tax is saved in total between the two years? [Do not consider the time value of money)

Answer rating: 100% (QA)

If the corporation chooses not to deduct the reserve for bad debts in 2021 its taxable income for th... View the full answer