2. Over the last 5 years, Corporation A has been consistently profitable.

Its earnings before taxes were as follows:

Earnings

Year 1 $ 1000

Year 2 $ 3000

Year 3 $ 4300

Year 4 $ 5200

Year 5 $ 4400

a. If the corporate tax rate was 25%, what were the firms income taxes for each year ?

b. Unfortunately, in year 6 the firm experienced a major decline in sales, which resulted in a loss $10,800. What impact will the loss have on the firms taxes

for each year if the permitted carryback is two years ?