Question

In: Accounting

Trey, Inc. reports a taxable loss of $140,000 for 2018. Itstaxable incomes for the years...

Trey, Inc. reports a taxable loss of $140,000 for 2018. Its taxable incomes for the years 2015 through 2017 respectively were $25,000, $35,000, and $40,000. Trey has no temporary or permanent differences. Trey elects the carryback provision. Taxable income in future years is not more likely than not, and the tax rate is 30% for all periods affected. What should Trey report as Net Loss on its 2018 income statement?

Select one:

a. $98,000

b. $120,500

c. $140,000

d. $117,500

e. $110,000

Solutions

Expert Solution

ANSWER

Correct option is D ie $117500

Explanation

Taxable Loss can be set off with upto two years after tax profit since there is no lasting or transitory contrasts.

For the year 3015 and 2017 are

  • = $40000*30/100

= $12000

  • = $35000*30/100

=$10500

Total =$12000+$10500

=$22500

Taxable Loss = $140000
less: taxable Profit = $22500

Trey report as Net Loss on its 2018 income statement
Net loss to be reported = $117500

ekkarill92 answered 2 years ago
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