Insure Corporation reported a net operating loss of $25 million for financial reporting and tax purposes. Taxable income last year and the previous year, respectively, was $20 million and $15 million. The enacted tax rate each year is 25%. Assume that Insure qualifies as a type of company that is allowed to carry back an NOL to two prior taxable years, using the earliest year first.

Required:

a. Prepare the journal entry to recognize the income tax benefit of the net operating loss.

Question

David Schmitt

Business

8 June, 02:10

Insure Corporation reported a net operating loss of $25 million for financial reporting and tax purposes. Taxable income last year and the previous year, respectively, was $20 million and $15 million. The enacted tax rate each year is 25%. Assume that Insure qualifies as a type of company that is allowed to carry back an NOL to two prior taxable years, using the earliest year first.

Required:

a. Prepare the journal entry to recognize the income tax benefit of the net operating loss.

+4

Answers (1)

Know the Answer?

Kyla Lynch · Answer 1

The answer is given below;

Explanation:

Net operating loss ($25,000,000)

Tax 25% ($6,250,000)

Asset on Operating loss Dr. $6,250,000

Retained Earnings Cr. $6,250,000