Maine Company reported a pretax operating loss of $150,000 for financial reporti

Question

Maine Company reported a pretax operating loss of $150,000 for financial reporting and tax purposes in 201 7 . The enacted tax rate is 40% for 201 7 and subsequent years. In 201 5 , Maine reported taxable income of $42,000 and paid $14,700 in income taxes; and in 2 01 6 Maine reported taxable income of $40,000 and paid $16,000 in taxes. Assume Maine requests a refund of taxes already paid by electing a loss carryback. In addition, Maine expects to generate positive operating profits and taxable income in the future. The after tax net loss reported by Maine on its year end December 31, 201 7 income statement is:

A) $ 119,300

B) $150,000

C) $ 90,000

D) $92,100   

Explanation / Answer

Solution:

Hence option D is correct.

Computation of After tax net loss for 2017 - Maine Company Particulars Amount Pre tax operating loss $150,000.00 Income Tax benefit - Loss Carryback to 2015 $14,700.00 Income Tax benefit - Loss Carryback to 2016 $16,000.00 Income tax benefit - Deferred tax assets on loss carry forward [($150,000 - $42,00 - $40,000) * 40%] $27,200.00 After tax net operating loss $92,100.00

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