Please help Trump Sheet Metal reported an operating loss of $160,000 for financi
ID: 2563135 • Letter: P
Question
Please help
Trump Sheet Metal reported an operating loss of $160,000 for financial reporting and tax purposes in 2016 The enacted tax rate is 40%. Taxable income, tax rates, and income taxes paid in Trump's first four years of operation were as follows: Trump elects the carryback option. A valuation allowance is not necessary. In 2017, both Pre-tax Net Income (GAAP) and taxable income are $100,000 (excluding the NOL) and the tax rate is 40%. Taxable Income $60,000 70,000 80,000 60,000 Tax Income Taxes Rates Paid 2012 2013 2014 2015 30% 30 40 45 $18,000 21,000 32,000 27,000 1. Enter the amount of the deferred tax asset Trump will recognize in 2016 related to the entry to record income tax expense: 2. In 2017, what is the debit to income tax expense? 3. In 2017, what is the credit to income taxes payable? You may find the following journal entry form helpful (for 2016). You are not required to use it. View transaction list Journal entry worksheet Record 2016 income tax benefit from operating loss Note: Enter debits before credits. Event General Journal Debit Credit Record entry Clear entry View general journalExplanation / Answer
1)In case there is any loss ,such loss can be setoff against the income of just two most recent prior year.
loss to be carryforward = 160000-140000 setoff = 20000 loss to carryforward
Defferedtax asset =$8000 [20000*.40]
1)Deferred tax asset =$8000
2)Income tax expense : 100000*.40= 40000
3)Income tax payable =expense-deferred tax asset
= 40000-8000 =$32000
year prior to 2016 Income available for set off Tax benefit due to setoff 2014 80000 80000*.40=32000 2015 60000 60000*.45=27000 Total 140000 59000