Question
In its first year of operations the Babco co. has a net operating loss(NOL) of $1,600 and a pretax loss of $1,360. The difference is
In its first year of operations the Babco co. has a net operating loss(NOL) of $1,600 and a pretax loss of $1,360. The difference is due to a temporary difference that will reverse in the following year when the enacted tax rate is 30%. The tax rate for the current year is 40%.
1. Compute the net tax expense or benefit that Babco would report for the current year. Enter a negative number for expense and a positive number for a benefit.
2. What if Babco's pretax loss was $1,600 and its NOL was $1,360 (i.e. pretax < taxable). Compute the net tax benefit or expense.
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