Jackson Corporation reported a pretax operating loss of $150,000 for financial r

ID: 2712433 • Letter: J

Question

Jackson Corporation reported a pretax operating loss of $150,000 for financial reporting and tax purposes in 2014. The enacted tax rate is 40% for 2014 and subsequent years. In 2012 Jackson reported taxable income of $42,000 and paid $14,700 in income taxes; and in 2013 Jackson reported taxable income of $40,000 and paid $16,000 in taxes. Assume Jackson requests a refund of taxes already paid by electing a loss carryback. In addition Jackson expects to generate positive operating profits and taxable income in the future.

The after tax net loss reported by Jenny on its year end December 31, 2014 income statement is:

A)$92,100

B)$119,300

C)$90,000

D)$150,000

Explanation / Answer

2012

2013

2014

Total

Opratiing Income

42,000

40,000

(150,000)

Tax paid

(14,700)

(16,000)

(30,700)

a quantitative cap of $1m multiplied by the applicable corporate tax rate of 40%= $400,000

As the lowest amount is tax actually paid in last two years =$30,700 , that amount will be carried back and remaining $119,300 can be carried forward.

So, after tax net loss to be reported after Dec31.02014 is $119,300

Ans B is correct