Ester's Bunny Barn has experienced a $80,000 loss due to discontinuing one of its divisions. Assuming that the company's tax rate is 30%, what amount will be reported for this loss on the income statement?

Question

Quizplus · Accepted Answer

When a company incurs a loss, it can use that loss to offset its taxable income in the future. This is known as a tax loss carryforward. To calculate the tax benefit of this loss, we need to multiply it by the company's tax rate.

$80,000 x 0.3 = $24,000

Therefore, the company will report a net loss of $56,000 on its income statement ($80,000 loss - $24,000 tax benefit).

Ester's Bunny Barn Has Experienced a $80,000 Loss Due to Discontinuing