Problem 1
ABC Company reported an operating loss of $132,000 for financial reporting and tax purposes in 2009. The enacted tax rate is 40% for 2009 and all future years. Assume that ABC elects a loss carryback. No valuation allowance is needed for any deferred tax assets. Taxable income, tax rates, and income taxes paid in ABC's first four years of operations were as follows:
|
|
Taxable
income
|
Tax
rates
|
Taxes
paid
|
|
2005
|
$30,000
|
30%
|
$9,000
|
|
2006
|
35,000
|
30%
|
10,500
|
|
2007
|
42,000
|
35%
|
14,700
|
|
2008
|
40,000
|
40%
|
16,000
|
Required:
1. What is the tax liability for each year?
2. What amount of tax refund is generated by the NOL?
2. In what year does a deferred tax asset arise and what is the related NOL.
3. What year is the deferred tax asset used, and how much?
Problem 2
On December 31 (the end of the fiscal year), ABC received the PBO report from the actuary. The following information was included in the report: ending PBO, $110,000; benefits paid to retirees, $10,000; interest cost, $7,200. The discount rate applied by the actuary was 8%. What was the beginning of the year PBO?