Oakland Corporation reported a net operating loss of $500,000 in 20X3 and elected to carry the loss forward to 20X4. Not included in the computation was a disallowed meals and entertainment expense of $20,000, tax-exempt income of $10,000, and deferred gain on a current year transaction treated as an installment sale of $250,000. The corporation's current earnings and profits for 20X3 would be:

Question

Quizplus · Accepted Answer

The net operating loss is adjusted by adding back the disallowed meals and entertainment expense and the tax-exempt income, and subtracting the deferred gain. Thus, ($500,000) + $20,000 + $10,000 - $250,000 = ($260,000).

Oakland Corporation Reported a Net Operating Loss of $500,000 in 20X3