Local Enterprises, Inc. had pre-tax income of $50 million this year. Last year was a bad year for Local with an operating loss of $44 million. Local will use as much of this loss as allowed to offset this year's pre-tax income and carry forward any remaining amount. Calculate the amount of the prior year's operating loss Local will carry forward to next year. Recall that due to the Tax Cuts and Jobs Act, prior years' cumulative operating losses may be used to offset up to 80% of the current years taxable income with any unused operating losses carried forward.

Local Enterprises, Inc. had pre-tax income of $50 million this year. Last year was a bad year for Local with an operating loss of $44 million. Local will use as much of this loss as allowed to offset this year's pre-tax income and carry forward any remaining amount. Calculate the amount of the prior year's operating loss Local will carry forward to next year. Recall that due to the Tax Cuts and Jobs Act, prior years' cumulative operating losses may be used to offset up to 80% of the current years taxable income with any unused operating losses carried forward.

Financial Management: Theory & Practice

16th Edition

ISBN:9781337909730

Author:Brigham

Publisher:Brigham

Chapter2: Financial Statements, Cash Flow,and Taxes

Section: Chapter Questions

Problem 19P: The Bookbinder Company had 500,000 cumulative operating losses prior to the beginning of last year....

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The Bookbinder Company had $550,000 cumulative operating losses prior to the beginning of last year. It had $110,000 in pre-tax earnings last year before using the past operating losses and has $330,000 in the current year before using any past operating losses. It projects $360,000 pre-tax earnings next year. Enter your answers as positive values. If an amount is zero, enter "0". Round your answers to the nearest dollar. How much taxable income was there last year? $ How much, if any, cumulative losses remained at the end of the last year? $ What is the taxable income in the current year? $ How much, if any, cumulative losses remain at the end of the current year? $ What is the projected taxable income for next year? $ How much, if any, cumulative losses are projected to remain at the end of next year?
In its first year of operations, Seagate Tech reported pretax accounting income of $780 million for the current year. Depreciation reported in the tax return in excess of depreciation in the income statement was $900 million. The excess tax will reverse itself evenly over the next three years. The current year's tax rate of 25% will be reduced under the current law to 30% next year and 35% for all subsequent years. At the end of the current year, the deferred tax liability related to the excess depreciation will be: Multiple Choice $315 million. $300 million. $270 million. $360 million.
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