20-21. Wilcox Corporation reported the following results for its first three yea

Question

20-21. Wilcox Corporation reported the following results for its first three years of operation: 2014 income (before income taxes) $200,000 2015 loss (before income taxes) -1,800,000 2016 income (before income taxes) 2,000,000 There were no permanent or temporary differences during these three years. Assume a corporate tax rate of 40% for 2014, 2015 and 2016. 20 Assuming that Wilcox elects to use the carryback provision, what income (loss) is reported in 2015? (Assume that any deferred tax asset recognized is more likely than not to be realized.) a. ($1,800,000) b. $ -0- c. ($1,720,000) d. ($1,100,000) 21 Assuming that Wilcox elects to use the carryforward provision and not the carryback provision, what is the change in deferred tax asset reported in 2015? a. $720,000 b. $800,000 c. $ -0- d. $640,000 20-21. Wilcox Corporation reported the following results for its first three years of operation: 2014 income (before income taxes) $200,000 2015 loss (before income taxes) -1,800,000 2016 income (before income taxes) 2,000,000 There were no permanent or temporary differences during these three years. Assume a corporate tax rate of 40% for 2014, 2015 and 2016. 20 Assuming that Wilcox elects to use the carryback provision, what income (loss) is reported in 2015? (Assume that any deferred tax asset recognized is more likely than not to be realized.) a. ($1,800,000) b. $ -0- c. ($1,720,000) d. ($1,100,000) 21 Assuming that Wilcox elects to use the carryforward provision and not the carryback provision, what is the change in deferred tax asset reported in 2015? a. $720,000 b. $800,000 c. $ -0- d. $640,000

Explanation / Answer

20) Option [c} 2015 Loss before income taxes $     -18,00,000 Benefit due to loss carryback (200000*40%) $            80,000 Benefit due to loss carryforward $                      -   Loss after tax $     -17,20,000 21) Option [a] Change in deferred tax asset reported $         7,20,000 (1800000*40%)

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