Question: Carl's Incorporated reported the following tax information for its first three years of operation.
| year |
tax income or loss |
income tax rate |
| 2015 |
440,000 |
35% |
| 2016 |
(910,000) |
37% |
| 2017 |
1,500,000 |
43% |
Assume that in 2016,there are no uncertainties regarding the realization of the NOL carryforward benefits. All tax rates were enacted at the beginning of the year. All tax rate changes are not known until the year of change.
Based on the information provided,
1. Determine the amount of any refund receivable from the 2016 NOL. In addition, indicate the amount of the tax benefits related to the NOL carryforward. Prepare any journal entries required in the year of the loss.
2. What is the after-tax net income or loss reported on the 2016 income? statement?
3. Compute the amount of any tax due in 2017.
4. Determine the balance of the NOL carryforward benefits remaining at the end of 2017.
5. Determine the income tax expense reported for 2017 and prepare the journal entry needed to record the 2017 tax provision.
6. Repeat parts (a) and (b) assuming that management has negative evidence indicating that the firm will only realize 90% of the NOL carryforward benefits over the carryforward period.