In 2016, Swope Company reports a pretax operating loss of $70,000 for both financial reporting and income tax purposes. Pretax financial income and taxable income for the previous 3 years had been: 2013-$15,000 (tax rate 20%), 2014-$24,000 (tax rate 25%), and 2015-$49,000 (tax rate 30%). The current tax rate is 30%, and no change in the tax rate has been enacted for future years. At the end of 2016, the journal entry recorded would contain an income tax benefit from an operating loss carryback of: a. $0 b. $18,300 c. $19,800 d. $19,950Carrybacks of operating losses The tax code allows companies to carry back the current year operating loss up to 2 previous years(in sequential order) in order to offset the income of the previous years and claim a tax refund. Comment Step 2 of 7 In this case, Company S has a pre-tax operating loss of $70,000 that is required to be carry back to be offset against previous year's taxable income of 2014 first and then for 2015. For 2014 the taxable income of $24,000 would be offset first, leaving a balance of $36,000 ($70, 000-$24,000) to be offset from the taxable income of $49,000 of 2015. Thus, the tax benefit for the carry back of loss for 2014 would be $6,000 (25%*$24,000 ) and for 2015 it would be $13,800 (30%x$46,000). Therefore, the total tax benefit would be $19,800 ($6,000 + $13,800)*Pretax operating loss of $70,000-for both financial reporting and income tax purposes ] In this case, Company-S has a pretax operating loss of $70,000 that is required to be carry-back. to be offset against previous year's taxable income of 2014-first-and then for-2015. *Income tax rate (Tax rate) in-2014-was-25% for-taxable income of-$24,0001 =:$70,000-(Pretax operating loss)---$24,000-(taxable income in-2014)f =-$36,0009 For-2014, the taxable income of-$24.000-would be offset (cancel) first, leaving a-balance of- $36,000-($70,000 --$24,000) to be offset from the taxable income of $49,000-of.2015.T *Income tax rate (Tax rate) in-2015-was-30% for-taxable income of-$49,0009 25 100 =-0.251 =-$24,000 (Taxable income)-x-0.25 (Income tax rate in-2014)1 =-$6.0007