Net Operating Loss Carryforward The net operating loss is considered as negative taxable income. When the tax-deductible expenses exceed the taxable revenues, the net operating loss is carry forwarded as it helps in getting deductions in future taxable amount. Net Operating Loss Carryback The net operating loss is considered as negative taxable income. It can be used in other fiscal year to offset the taxable income. The net operating loss carry back helps the companies to get reduction in the taxes from the past profitable years, in the form of tax refund, for the tax paid on the profit earned on those years. Temporary Difference Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently, the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference. Multiple Temporary Difference It is very unlikely to have a single temporary difference in any company. In that case, the same concept of temporary difference will be applicable for multiple temporary difference. In case of multiple temporary difference, we have to categorize all temporary difference into future taxable amount and future deductible amounts. The total amount of future taxable amounts multiplied by future tax rate will generate deferred tax liability and total amount of future deductible amount multiplied by future tax rate will generate deferred tax asset . To prepare: The journal entry to recognize the income tax benefit of the net operating loss in 2018 through carryback option.
Net Operating Loss Carryforward The net operating loss is considered as negative taxable income. When the tax-deductible expenses exceed the taxable revenues, the net operating loss is carry forwarded as it helps in getting deductions in future taxable amount. Net Operating Loss Carryback The net operating loss is considered as negative taxable income. It can be used in other fiscal year to offset the taxable income. The net operating loss carry back helps the companies to get reduction in the taxes from the past profitable years, in the form of tax refund, for the tax paid on the profit earned on those years. Temporary Difference Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently, the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference. Multiple Temporary Difference It is very unlikely to have a single temporary difference in any company. In that case, the same concept of temporary difference will be applicable for multiple temporary difference. In case of multiple temporary difference, we have to categorize all temporary difference into future taxable amount and future deductible amounts. The total amount of future taxable amounts multiplied by future tax rate will generate deferred tax liability and total amount of future deductible amount multiplied by future tax rate will generate deferred tax asset . To prepare: The journal entry to recognize the income tax benefit of the net operating loss in 2018 through carryback option.
Definition Definition Assets available to stockholders after a company's liabilities are paid off. Stockholders’ equity is also sometimes referred to as owner's equity. A stockholders’ equity or book value generally includes common stock, preferred stock, and retained earnings and is an indicator of a company's financial strength.
Chapter 16, Problem 16.10P
1.
To determine
Net Operating Loss Carryforward
The net operating loss is considered as negative taxable income. When the tax-deductible expenses exceed the taxable revenues, the net operating loss is carry forwarded as it helps in getting deductions in future taxable amount.
Net Operating Loss Carryback
The net operating loss is considered as negative taxable income. It can be used in other fiscal year to offset the taxable income. The net operating loss carry back helps the companies to get reduction in the taxes from the past profitable years, in the form of tax refund, for the tax paid on the profit earned on those years.
Temporary Difference
Temporary difference refers to the difference of one income recognized by the tax rules and accounting rules of a company in different periods. Consequently, the difference between the amount of assets and liabilities reported in the financial reports and the amount of assets and liabilities as per the company’s tax records, is known as temporary difference.
Multiple Temporary Difference
It is very unlikely to have a single temporary difference in any company. In that case, the same concept of temporary difference will be applicable for multiple temporary difference. In case of multiple temporary difference, we have to categorize all temporary difference into future taxable amount and future deductible amounts. The total amount of future taxable amounts multiplied by future tax rate will generate deferred tax liability and total amount of future deductible amount multiplied by future tax rate will generate deferred tax asset.
To prepare: The journal entry to recognize the income tax benefit of the net operating loss in 2018 through carryback option.
2.
To determine
To show: The lower portion of the 2018 income statement that reports the income tax benefit of the net operating loss.
3.
To determine
To prepare: The journal entry to record the income taxes in 2019 assuming pre-tax accounting income is $60 million.
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