P 16 - 10 Fores Construction Company reported a pretax operating loss of $1.35 Net operating loss million for financial reporting purposes in 2016 . Contributing to the loss Carryback and were ( a) a penalty of $5 million assessed by the Environmental Protection carryforward ; multiple* differences Agency for violation of a federal law and paid in 2016 and ( 6 ) an estimated loss of $ 10 million from accruing a loss contingency . The loss will be tax LOT6 - 2 , LOT6- 4 , deductible when paid in 2017 . LOTE - T 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 Forest's two previous years of operation was as follows :" 2014 $75 million 2015 30 million P Required : 1 . Prepare the journal entry to recognize the income tax benefit of the* net operating loss in 2016 . Fores elects the carryback option . 2. Show the lower portion of the 2016 income statement that reports the income tax benefit of the net operating loss . 3. Prepare the journal entry to record income taxes in 2017 assuming pretax accounting income is $60 million . No additional temporary differences originate in 2017