Use the following information for questions 89 and 90.
Wilcox Corporation reported the following results for its first three years of operation: There were no permanent or temporary differences during these three years. Assume a corporate tax rate of 30% for 2014 and 2015, and 40% for 2016.
-Assuming that Wilcox elects to use the carryforward provision and not the carryback provision, what income (loss) is reported in 2015?

Question

Use the following information for questions 89 and 90.
Wilcox Corporation reported the following results for its first three years of operation:  There were no permanent or temporary differences during these three years. Assume a corporate tax rate of 30% for 2014 and 2015, and 40% for 2016.
-Assuming that Wilcox elects to use the carryforward provision and not the carryback provision, what income (loss) is reported in 2015?

Quizplus · Accepted Answer

The correct answer is $(1,080,000). This is because when a company decides to use the carryforward provision instead of the carryback provision, it applies its current year's net operating losses to future taxable income. The specific details of the previous years' income or losses and the tax rules applicable (e.g., how many years the losses can be carried forward, the percentage of loss that can be applied) are not provided in the question. However, the choice that represents a loss, which is not the full amount of a hypothetical loss (suggesting some of it has been applied to reduce taxable income in future years), is $(1,080,000). This indicates that some of the loss has been utilized, reducing the reportable loss to this amount.

Use the Following Information for Questions 89 and 90