Solution 1:
Computation of Taxable Operating Loss (2021) | |
Particulars | Amount (In million) |
Pre-tax operating Income (Loss) | -$212.00 |
Add: Non-deductible penalty | $4.00 |
Add: Estimated loss of contigency deductible in 2022 | $30.00 |
Taxable operating income (Loss) | -$178.00 |
Journal Entries - Fore Farms (2021) | |||
Event | Particulars | Debit (In Million) | Credit (In Million) |
1 | Deferred tax assets Dr ($96*25%) | $24.00 | |
To Income Tax Benefits - Net operating loss | $24.00 | ||
(To record deferred tax assets for temporary differences and loss carry forward) |
Solution 2:
net operating loss reported in 2021 income statement = Pre tax loss + Income tax benefit
= -$212 + $24 = -$188
Solution 3:
Journal Entries - Fore Farms (2022) | |||
Event | Particulars | Debit (In Million) | Credit (In Million) |
1 | Income tax expense Dr | $42.00 | |
To Income Tax payable (72*25%) | $18.00 | ||
To Deferred tax assets | $24.00 | ||
(To record income tax expense for 2022) |
Fore Farms reported a pretax operating loss of $212 million for financial reporting purposes in 2021....
Fore Farms reported a pretax operating loss of $204 million for financial reporting purposes in 2021. Contributing to the loss were (a) a penalty of $4 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2021 and (b) an estimated loss of $10 million from accruing a loss contingency. The loss will be tax deductible when paid in 2022. The enacted tax rate is 25%. There were no temporary differences at the beginning...
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