Solution 1:
Computation of Taxable Operating Loss (2021) | |
Particulars | Amount (In million) |
Pre tax operating Income (Loss) | -$136.00 |
Add: Non deductible penalty | $4.00 |
Add: Estimated loss contigency deductible in 2022 | $10.00 |
Taxable operating income (Loss) | -$122.00 |
Net Operating loss carryback | Amount (In million) | Rate of Tax | Tax | Recorded as |
Carried back - 2019 | $68.00 | 25% | $17.00 | |
Carried back - 2020 | $44.00 | 25% | $11.00 | |
Total Carryback | $112.00 | $28.00 | Income tax benefit | |
Deferred Tax Assets | Amount (In million) | Rate of Tax | Tax | |
Loss Carried forward | $10.00 | 25% | $2.50 | |
Estimated loss contigency deductible in 2022 | $10.00 | 25% | $2.50 | |
Total Temporary differences and deferred tax assets | $20.00 | $5.00 | Deferred tax assets |
Journal Entries - Fore Farms (2021) | |||
Event | Particulars | Debit (In Million) | Credit (In Million) |
1 | Receivables - Income Tax Refund ($112*25%) | $28.00 | |
Deferred tax assets Dr ($20*25%) | $5.00 | ||
To Income Tax Benefits - Net operating loss | $33.00 | ||
(To record deferred tax assets for temporary differences and loss carry forward) |
Solution 2:
Income Statement - Fore Farms | |
Particulars | Amount (In Million) |
Operating Income (loss) before income tax | -$136.00 |
Income tax benefit - Net operating loss | $33.00 |
Net Operating Income (Loss) | -$103.00 |
Solution 3:
Journal Entries - Fore Farms (2022) | |||
Event | Particulars | Debit (In Million) | Credit (In Million) |
1 | Income tax expense Dr | $46.00 | |
To Income Tax payable (164*25%) | $41.00 | ||
To Deferred tax assets | $5.00 | ||
(To record income tax expense for 2022) |
Fore Farms reported a pretax operating loss of $136 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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fore farms reported a pretax operating loss of $137 million for financial reporting purposes in 2021. Contributing to the loss were a penalty of $5 million assessed by the environmental protection agency for violation of a federal law and paid in 2021, and b.) an estimated loss of $12 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 of...
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