The following information pertains to Entiguan Sports, a hypothetical developer of products used to treat sports-related injuries. (The treatment of items for accounting and tax purposes is based on fi ctitious accounting and tax standards and is not specific to a particular jurisdiction.) Calculate the tax base and carrying amount for each item.

1. Dividends receivable : On its balance sheet, Entiguan Sports reports dividends of €1 million receivable from a subsidiary. Assume that dividends are not taxable.

2. Development costs : Entiguan Sports capitalized development costs of €3 million during the year. Entiguan amortized €500,000 of this amount during the year. For tax purposes amortization of 25 percent per year is allowed.

3. Research costs : Entiguan incurred €500,000 in research costs, which were all expensed in the current fiscal year for financial reporting purposes. Assume that applicable tax legislation requires research costs to be expensed over a four-year period rather than all in one year.

4. Accounts receivable : Included on the income statement of Entiguan Sports is a provision for doubtful debt of €125,000. The accounts receivable amount reflected on the balance sheet, after taking the provision into account, amounts to €1,500,000.

The tax authorities allow a deduction of 25 percent of the gross amount for doubtful debt.