Question

Maine Company reported a pretax operating loss of $150,000 for financial reporting and tax purposes in 2017. The enacted tax rate is 40% for 2017 and subsequent years. In 2015, Maine reported taxable income of $42,000 and paid $14,700 in income taxes; and in 2016 Maine reported taxable income of $40,000 and paid $16,000 in taxes. Assume Maine requests a refund of taxes already paid by electing a loss carryback. In addition, Maine expects to generate positive operating profits and taxable income in the future. The after tax net loss reported by Maine on its year end December 31, 2017 income statement is: A) $119,300 B) $150,000 C) $90,000 D) $92,100

Answer 1

Solution:

Computation of After tax net loss for 2017 - Maine Company
Particulars	Amount
Pre tax operating loss	$150,000.00
Income Tax benefit - Loss Carryback to 2015	$14,700.00
Income Tax benefit - Loss Carryback to 2016	$16,000.00
Income tax benefit - Deferred tax assets on loss carry forward [($150,000 - $42,00 - $40,000) * 40%]	$27,200.00
After tax net operating loss	$92,100.00

Hence option D is correct.