Puritan Corp. reported the following pretax accounting income and taxable income for its first three years of operations: Puritan's tax rate is 40% for all years. Puritan elected a loss carryback.
- As of December 31, 2018. Puritan was certain that it would recover the full tax benefit of the NOL that remained after the operating loss carryback.
What would Puritan report as net income for 2019?

Question

Puritan Corp. reported the following pretax accounting income and taxable income for its first three years of operations:  Puritan's tax rate is 40% for all years. Puritan elected a loss carryback.
- As of December 31, 2018. Puritan was certain that it would recover the full tax benefit of the NOL that remained after the operating loss carryback.
What would Puritan report as net income for 2019?

Quizplus · Accepted Answer

11ea937b_35c5_893d_a419_d1da285be713_TB2599_00 *The tax benefit of the loss carryforward (40% × $700,000) was recognized in 2018 and is reversed in 2019. The journal entry to record the tax expense in 2019 is: 11ea937b_35c5_893e_a419_bfeb26bc7f86_TB2599_00