Question
In: Accounting
TRW Inc. began business in 2018 and incurred net operating losses for its first two years....
TRW Inc. began business in 2018 and incurred net
operating losses for its first two years. In 2020, it became
profitable. The following table shows TRW’s taxable income
before consideration of these NOLs.
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | |||||||||||||||||||||||||||||
| Taxable income | $(420,000) | $(358,000) | $81,000 | $41,000 | $210,000 | $298,000 | $387,000 | $905,000 | ||||||||||||||||||||||||||||
Those are in " Bold" are right answers. Those are not in Bold are the wrong answers that was answered by one of the chegg expert. |
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Solutions
Expert Solution
| From 2018 NEW carry over rule , carry back is eliminated for non farming loss and carry over can be made unlimited but limited to the | ||||||
| extent of 80% of taxable income. | ||||||
| 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | |
| Tax. income before NOL deduction | $ 81,000 | $ 41,000 | $ 210,000 | $ 298,000 | $ 387,000 | $ 905,000 |
| NOL Deduction limited to 80% of taxable income | (64,800) | (32,800) | (168,000) | (238,400) | (274,000) | - |
| Taxable Income | $ 16,200 | $ 8,200 | $ 42,000 | $ 59,600 | $ 113,000 | $ 905,000 |
| Calculation: | ||||||
| 2018 | $ 420,000 | |||||
| 2019 | 358,000 | |||||
| Total NOL | $ 778,000 | |||||
| Less: carry over to 2020 - 2023 | (64,800) | |||||
| (32,800) | ||||||
| (168,000) | ||||||
| (238,400) | (504,000) | |||||
| NOL deduction in 2024 | $ 274,000 | |||||
| Note: I have tried my best for corret solution, still if there is any issue, please | ||||||
| ask in comment before posting again, Thanks. | ||||||
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