Wilcox Corporation reported the following results for its first three years of operation: 2020 income (before...
Wilcox Corporation reported the following results for its first three years of operation:
2020 income (before income taxes) $300,000
2021 loss (before income taxes) (2,700,000)
2022 income (before income taxes) 3,000,000
There were no permanent or temporary differences during these three years. Assume a corporate tax rate of 20% for 2020 and 2021, and 30% for 2022. Assuming that Wilcox elects to use the carryforward provision, what income (loss) is reported in 2021?
A. $(2,700,000)
B. $(1,890,000)
C. $-0-
D. $(2,640,000)
Please show work.
Homework Answers
Income before taxes = ($2,700,000)
Loss carryforward to 2022 = ($2,700,000)
Deferred tax assets for loss carryforward = $2,700,000 * 30% = $810,000
Income (Loss) to reported for 2021 = Loss before taxes - Income tax benefit for carry forward of losses
= ($2,700,000) + $810,000 = ($1,890,000)
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