Indicate and explain whether the following situation should betreated as a temporary difference or a permanent difference andsupport your answer
pretax accounting income and taxable income differ because 80%of dividends received from US corporations was deducted fromtaxable income, while 100% of dividends received was reported forfinancial statement purposes.
Indicate and explain whether the following situation should betreated as a temporary difference or a permanent difference andsupport your answer
pretax accounting income and taxable income differ because 80%of dividends received from US corporations was deducted fromtaxable income, while 100% of dividends received was reported forfinancial statement purposes.
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).) |
