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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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In 2019, Swope Company reports a pretax operating loss of $100,000 for both financial reporting and income tax purposes. Swope concludes that the operating loss in 2019 is temporary and that the company will return to profitability in 2020. The current tax rate is 21%, and no change in the tax rate has been enacted for future years. At the end of 2019, the journal entry recorded would contain an income tax benefit from an operating loss carryforward of:

  1. a. $0
  2. b. $89,000
  3. c. $21,000
  4. d. $100,000

To determine

Calculate the income tax benefit from an operating loss carry forward for Company S.

Explanation

Net Operating Loss Carry forward:  The net operating loss is considered as negative taxable income. When the tax-deductible expenses exceed the taxable revenues, the net operating loss is carry forwarded as it helps in getting deductions in future taxable amount.

Calculate the amount of income tax benefit from an operating loss carry forward:

Income tax benefit from operating loss carry forward}

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