Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Fore Farms reported a pretax operating loss of $236 million for financial reporting purposes in 2021. Contributing to the loss were (a) a penalty of

Fore Farms reported a pretax operating loss of $236 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 of the year and none originating in 2021 other than those described above. Taxable income in Foress two previous years of operation was as follows:

2019 $ 104 million
2020 $ 80 million

Required: 1. Prepare the journal entry to recognize the income tax benefit of the net operating loss in 2021. Assume Fore will carry back its NOL to prior years. 2. What is the net operating loss reported in 2021 income statement? 3. Prepare the journal entry to record income taxes in 2022 assuming pretax accounting income is $256 million. No additional temporary differences originate in 2022.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

No Nonsense Employee Retention Audit

Authors: Jeff Kortes

1st Edition

0988307014, 978-0988307018

More Books

Students also viewed these Accounting questions