Exercise 16-23 (Algo) Net operating loss carryforward; financial statement effects [LO16-7]During 2024, its first year of operations, Baginski Steel Corporation reported a net operating loss of $444,000 for financial reportingand tax purposes. The enacted tax rate is 25%.Required:1. Prepare the journal entry to recognize the income tax benefit of the net operating loss. Assume the weight of available evidencesuggests that future taxable income will be sufficient to benefit from future deductible amounts arising from the net operatingloss carryforward.2. Show the lower portion of the 2024 income statement that reports the income tax benefit of the net operating loss.

Step 1: Analyze the SituationBaginski Steel Corporation, in its first year (2024), reported a net…

Answered: Exercise 16-23 (Algo) Net operating…

FINANCIAL ACCOUNTING

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Chapter1: Financial Statements And Business Decisions

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27. Analysis of the assets and liabilities of Iniwan Corp. on December 31, 2016 disclosed assets with a tax basis of P1,000,000 and a book basis of P1,300,000. There was no difference in the liability basis. The difference in the asset basis arose from temporary difference that would reverse in the following years: 2019- P72,000 2020- 40,000 The enacted tax rates are 30% for 2016- 2019 and 32% for the years 2020-2021. What is the total deferred tax 2021 - P38,000 2017- P80,000 2018 - 70,000 liability at December 31, 2016? А. Р90,000 В. Р91,560 C. P96,000 D. P99,000
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23. Operating income and tax rates for CJ. Company's first three years of operations were as follows: Amount a. $325,000 b. $340,000 2014 2015 2016 c. $325,000 d. $340,000 Income $300,000 ($850,000) $1,060,000 Assuming that C.J. Company opts to carryforward its 2015 NOL, what is the amount of deferred tax asset or liability that C.J. Company would report on its December 31, 2015 balance sheet? Enacted tax rate 35% 30% 40% Deferred tax asset or liability Deferred tax liability Deferred tax liability Deferred tax asset Deferred tax asset
17. Kiwi Corporation reports the following information: • Correction of overstatement of depreciation expense in prior years, net of tax- P215,000 • Dividends declared- P160,000 • Net income- P500,000 • Retained earnings, 1/1/21, as reported- P1,000,000 Kiwi should report retained earnings, December 31, 2021 at a. P1,555,000. b. P1,340,000. c. P1,125,000. d. P785,000.
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24. Horner Corporation has a deferred tax asset at December 31, 2015 of $80,000 due to the recognition of potential tax benefits of an operating loss carryforward. The enacted tax rates are as follows: 40% for 2012-2014; 35% for 2015; and 30% for 2016 and thereafter. Assuming that management expects that only 60% of the related benefits will actually be realized, a valuation account should be established in the amount of: a. $80,000 b. $32,000 c. $28,000 d. $24,000
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WhyRU Company usually depreciates its equipment using straight line method for accounting purposes, but for tax purposes its sum-of-the-years method. WhyRU Company acquired the equipment through purchase amounting to P2,400,000 on January 1,2018. Assume a tax rate of 30%. Useful life is 4 years. WhyRU Company made the following income in its income tax return available through reports for 2018 – P800,000; 2019 – P890,0000; 2020 – P1,200,000; 2021 – P1,500,000 There is no other differences between WhyRU's accounting income and taxable income for years 2018, 2019, 2020 and 2021 other than for the difference in depreciation for the equipment described.
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