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I need help with this one. Can somebody explain me how to do it. I think that the carry forward from NOL should be accounted too plus/minus the temporary difference, but I am not sure if I am correct. Answers $96 and $144 are incorrect.

In its first year of operations the Babco co. has a net operating loss(NOL) of $1,600 and a pretax loss of $1,360. The difference is due to a temporary difference that will reverse in the following year when the enacted tax rate is 30%. The tax rate for the current year is 40%.

1. Compute the net tax expense or benefit that Babco would report for the current year. Enter a negative number for expense and a positive number for a benefit.

2. What if Babco's pretax loss was $1,600 and its NOL was $1,360 (i.e. pretax < taxable). Compute the net tax benefit or expense.

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Bunny Greenfelder
Bunny GreenfelderLv2
29 Sep 2019

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