**Question 20: Net Operating Loss Carryback Calculation**Assume that Puritan Corporation operates in an industry for which net operating loss (NOL) carryback is allowed. Puritan Corporation reported the following pretax accounting income and taxable income for its first three years of operations:- 2023: $358,000- 2024: $(503,000) (loss)- 2025: $753,000Puritan’s tax rate is 25% for all years. Puritan elected a loss carryback.As of December 31, 2024, Puritan was certain that it would recover the full tax benefit of the NOL that remained after the operating loss carryback.**Question:** What would Puritan report as net income for 2025?**Multiple Choice Options:**- $564,750- $141,198- $611,812- $613,804---**Explanation:**In the scenario above, Puritan Corporation experiences a pretax operating loss of $503,000 in 2024, which it elects to carry back to 2023, reducing its taxable income for that year. When calculating net income for 2025, it is necessary to account for the tax effect of utilizing the remaining NOL.To determine the correct net income for 2025, you need to apply the tax rate to any taxable income after accounting for any carried forward portion of the NOL, calculating the benefit of the tax savings.

Formula: Net income reported for the year=Pretax income for the year×100%-tax rateWorkings: Net income reported for 2025=Pretax income for 2025×100%-tax rate=$753,000×100%-25%=$753,000×75%=$564,750Answer: Net income reported for 2025=$564,750 The 1st option is the correct option.

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Accounting

Assume that Puritan Corporation operates in an industry for which NOL carryback is allowed. Puritan Corporation reported the following pretax accounting income and taxable income for its first three years of operations: 2023 $ 358,000 2024 (503,000) 2025 753,000 Puritan's tax rate is 25% for all years. Puritan elected a loss carryback. As of December 31, 2024. Puritan was certain that it would recover the full tax benefit of the NOL that remained after the operating loss carryback. What would Puritan report as net income for 2025? Multiple Choice о O $564,750 $141,198 $611,812 $613,804

Assume that Puritan Corporation operates in an industry for which NOL carryback is allowed. Puritan Corporation reported the following pretax accounting income and taxable income for its first three years of operations: 2023 $ 358,000 2024 (503,000) 2025 753,000 Puritan's tax rate is 25% for all years. Puritan elected a loss carryback. As of December 31, 2024. Puritan was certain that it would recover the full tax benefit of the NOL that remained after the operating loss carryback. What would Puritan report as net income for 2025? Multiple Choice о O $564,750 $141,198 $611,812 $613,804

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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