Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Fores Construction Company reported a pretax operating loss of $150 million for financial reporting purposes in 2016. Contributing to the loss were (a) a penalty

Fores Construction Company reported a pretax operating loss of $150 million for financial reporting purposes in 2016. Contributing to the loss were (a) a penalty of $10 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2016 and (b) an estimated loss of 20 million from accruing a loss contingency. The loss will be tax deductible when paid in 2017.

The enacted tax rate is 40%. There were no temporary differences at the beginning of the year and none originating in 2016 other than those described above. Taxable income in Foress two previous years of operation was as follows:

2014 $ 75 million
2015 25 million

Required:
1.

Prepare the journal entry to recognize the income tax benefit of the net operating loss in 2016. Fores elects the carryback option. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

2.

What is the net operating loss reported in 2016 income statement? (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

3.

Prepare the journal entry to record income taxes in 2017 assuming pretax accounting income is $70 million. No additional temporary differences originate in 2017. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

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

Agile Governance And Audit An Overview For Auditors And Agile Teams

Authors: Christopher Wright

1st Edition

184928587X, 978-1849285872

More Books

Students also viewed these Accounting questions

Question

I am paid fairly for the work I do.

Answered: 1 week ago

Question

I receive the training I need to do my job well.

Answered: 1 week ago