Fores Construction Company reported a pretax operating loss of$250 million for financial reporting purposes in 2016. Contributingto the loss were (a) a penalty of $15 million assessed by theEnvironmental Protection Agency for violation of a federal law andpaid in 2016 and (b) an estimated loss of 10 million from accruinga loss contingency. The loss will be tax deductible when paid in2017. The enacted tax rate is 40%. There were no temporarydifferences at the beginning of the year and none originating in2016 other than those described above. Taxable income in Foresâstwo previous years of operation was as follows:
2014- $130 million
2015- 75 million
Required:
1. Prepare the journal entry to recognize the income tax benefit ofthe net operating loss in 2016. Fores elects the carryback option.(If no entry is required for a transaction/event, select"No journal entry required" in the first account field. Enter youranswers in millions (i.e., 10,000,000 should be entered as10).)
2. What is the net operating loss reported in 2016income statement (Enter your answers in millions (i.e., 10,000,000should be entered as 10).)
3. Prepare the journal entry to record income taxes in2017 assuming pretax accounting income is $115 million. Noadditional temporary differences originate in 2017.
Fores Construction Company reported a pretax operating loss of$250 million for financial reporting purposes in 2016. Contributingto the loss were (a) a penalty of $15 million assessed by theEnvironmental Protection Agency for violation of a federal law andpaid in 2016 and (b) an estimated loss of 10 million from accruinga loss contingency. The loss will be tax deductible when paid in2017. The enacted tax rate is 40%. There were no temporarydifferences at the beginning of the year and none originating in2016 other than those described above. Taxable income in Foresâstwo previous years of operation was as follows:
2014- $130 million
2015- 75 million
| Required: |
| 1. | Prepare the journal entry to recognize the income tax benefit ofthe net operating loss in 2016. Fores elects the carryback option.(If no entry is required for a transaction/event, select"No journal entry required" in the first account field. Enter youranswers in millions (i.e., 10,000,000 should be entered as10).) 2. What is the net operating loss reported in 2016income statement (Enter your answers in millions (i.e., 10,000,000should be entered as 10).) 3. Prepare the journal entry to record income taxes in2017 assuming pretax accounting income is $115 million. Noadditional temporary differences originate in 2017. |
Related questions
| Fores Construction Company reported a pretax operating loss of $200 million for financial reporting purposes in 2016. Contributing to the loss were (a) a penalty of $10 million assessed by the Environmental Protection Agency for violation of a federal law and paid in 2016 and (b) an estimated loss of 30 million from accruing a loss contingency. The loss will be tax deductible when paid in 2017. |
| The enacted tax rate is 40%. There were no temporary differences at the beginning of the year and none originating in 2016 other than those described above. Taxable income in Foresâs two previous years of operation was as follows: |
| 2014 | $ | 105 | million |
| 2015 | | 30 | million |
| Required: |
| 1. | Prepare the journal entry to recognize the income tax benefit of the net operating loss in 2016. Fores elects the carryback option. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) |
| 2. | What is the net operating loss reported in 2016 income statement? (Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) |
| 3. | Prepare the journal entry to record income taxes in 2017 assuming pretax accounting income is $100 million. No additional temporary differences originate in 2017. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) |
In 2016, Ryan Management collected rent revenue for 2017 tenantoccupancy. For financial reporting, the rent is recorded asdeferred revenue and then recognized as income in the periodtenants occupy rental property. But for income tax reporting it istaxed when collected. The deferred portion of the rent collected in2016 was $80 million. Taxable income is $260 million. No temporarydifferences existed at the beginning of the year, and the tax rateis 40%. Suppose the deferred portion of the rent collected was $70million at the end of 2017. Taxable income is $280 million. |
Prepare the appropriate journal entry to record income taxes.(If no entry is required for a particular event, select "Nojournal entry required" in the first account field. Enter youranswers in millions (i.e., 10,000,000 should be entered as10).) |
