Advanced Accounting
12th Edition
ISBN: 9781305084858
Author: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Publisher: Cengage Learning
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Question
Chapter 12, Problem 12.2P
To determine
Pre-tax loss:
Pre-tax loss is basically defined as the loss which is incurred before paying the income taxes.
Income tax expense is basically defined as an expense that the business has to pay during a particular accounting period.
To calculate:
The pre-tax loss and related tax expense for the first three-quarters of 2017for continuing and discontinued operations.
Expert Solution & Answer
Answer to Problem 12.2P
Tax Benefit for Quarter 2 is
Explanation of Solution
Tax expense (benefit) for the first three quarters is as follows:
| Interim period (Owner) | Tape of income | Pre-tax income (loss) | Effective tax rate | Tax | expense (benefit) Previously reported an SI | Current period (in SI | |
| Current period lin SI | Year-to-date (in 5) | Year.,-Date (n 5) | |||||
| First | Continuing operation | Refer note A | - | ||||
| First - restated | Continuing operation | Refer note B | - | ||||
| First - restated | Discontinued operation | Refer note B | - | - | - | ||
| Second | Continuing operation | 26.44% | |||||
| Second | Discontinued operation | Refer working note A | - | ||||
| Third | Continuing operation | 24.73% | |||||
| Third | Discontinued operation | Refer working note B | |||||
Note A:
Tax benefit can be estimated by summing the tax expense in the past 2 years -
Note B:
Tax benefit can be discovered by carrying the loss of $15,000 and tax credit in the past 2 years -
Note C:
Pre-tax income (losses) of discontinued operations
Note D:
Pre-tax income (losses) of discontinued operations
Working Note A.
| Particulars | Ordinary income | All sources |
| Annual income (loss) | ||
| Annual net tax expense (benefit), |
Calculation of tax benefit associated with the discontinued operation - Quarter 2
Working Note B.
| Particulars | Ordinary income | All sources |
| Annual income (loss) | ||
| Annual net tax expense (benefit) | _ |
Calculation of tax benefit associated with the discontinued operation - Quarter 3:
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Students have asked these similar questions
XYZ Company reported the following pretax income (loss) and related tax rates during the years 2016-2021.
Year
Pretax Income (loss)
Tax rate
2016
$75,000
30%
2017
150,000
30%
2018
240,000
40%
2019
(540,000)
48%
2020
210,000
40%
2021
300,000
42%
Prepare the journal entries for the years 2019 and 2020 to record income taxes and the tax effects of the loss. Assume that XYZ elects the carryback provision where possible and it is probable that it will realize benefits of any loss carryforward.
Prepare the portion of the income statement that presents your answer in part (a) for the year ended 2019.
During 2016, its first year of operations, Baginski Steel Corporation reported a net operating loss of $375,000 for financial reporting and tax purposes. The enacted tax rate is 40%. Required: 1. Prepare the journal entry to recognize the income tax benefit of the net operating loss. Assume the weight of available evidence suggests future taxable income sufficient to benefit from future deductible amounts from the net operating loss carryforward. 2. Show the lower portion of the 2016 income statement that reports the income tax benefit of the net operating loss.
Wynn Farms reported a net operating loss of $144,000 for financial reporting and tax purposes in 2021. The enacted tax rate is 25%.
Taxable income, tax rates, and income taxes paid in Wynn's first four years of operation were as follows:
Taxable Tax
Income
2017 $ 71,000 20%
2018
81,000 20
2019
124,000 25
2020
71,000 40
Rates Income Taxes Paid
Required:
1. Prepare the journal entry to recognize the Income tax benefit of the net operating loss. NOL carrybacks are not allowed for most
companies, except for property and casualty Insurance companies as well as some farm-related businesses. Assume Wynn is one of
those businesses.
2. Show the lower portion of the 2021 Income statement that reports the income tax benefit of the net operating loss.
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Chapter 12 Solutions
Advanced Accounting
Ch. 12 - Prob. 1UTICh. 12 - Prob. 2UTICh. 12 - Prob. 3UTICh. 12 - Prob. 4UTICh. 12 - Prob. 1.1ECh. 12 - Prob. 1.2ECh. 12 - Prob. 1.3ECh. 12 - Prob. 1.4ECh. 12 - Prob. 1.5ECh. 12 - Prob. 1.6E
Ch. 12 - Prob. 2ECh. 12 - Prob. 3ECh. 12 - Prob. 4.1ECh. 12 - Prob. 4.2ECh. 12 - Prob. 6ECh. 12 - Prob. 7ECh. 12 - Ratable allocation for nonordinary items. Baxter...Ch. 12 - Prob. 9.1ECh. 12 - Prob. 9.2ECh. 12 - Prob. 9.3ECh. 12 - Prob. 10ECh. 12 - Prob. 12.1PCh. 12 - Prob. 12.2PCh. 12 - Prob. 12.3PCh. 12 - Prob. 12.4PCh. 12 - Prob. 12.5PCh. 12 - Prob. 12.6PCh. 12 - Prob. 12.7.1PCh. 12 - Prob. 12.7.2PCh. 12 - Prob. 12.7.3PCh. 12 - Prob. 12.8.1PCh. 12 - Prob. 12.8.2P
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