Fores Construction Company reported a pretax operating loss of $200 million for
ID: 2583441 • Letter: F
Question
Fores Construction Company reported a pretax operating loss of $200 million for financial reporting Protection Agency for violation of a federal law and paid in 2016 and (b) an estimated loss of 30 million from originating in 2016 other than those described above. Taxable income in Fores's two previous years of operation was as follows: 2014 $105 million 2015 30 million Required: elects the carryback option. (If no entry is required for a transactionlevent, 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).)Explanation / Answer
*All the figures mentioned below are in $ million
Future deductible
amounts
As there were no temporary difference on the beginning of the year and none originating in the year so the ending balance of deferred tax asset will be $14 million.
1. Journal entry to recognize Income Tax benefit
2. Calculation of net operating loss to be reported
3. PreTax accounting income = $100 M
Income Tax payable @40% = 100*40% = $ 40 M
Less: Deferred Tax asset = $ 14 M
Net Income Tax payable = $ 26 M
Journal entry to record Income tax for the year 2017
**All the figures mentioned above are in $ million
2014 2015 2016Future deductible
amounts
Operating loss 200 Less: Federal law penalty 10 Less: Loss of contingency 30 30 Taxable Loss 160 Loss Carryback 105 30 (135) Loss carryforward 25 25 Net Value 0 35 Tax rate 40% 40% 40% 40% Tax refundable 42 12 0 Deffered tax asset 14