Question

White Inc. reports a taxable and financial loss of $750,000 for 2017. Its pretax financial income for the last two years was as follows: 2015 $300,000 2016 400,000 The amount that White Inc. reports as a net loss for financial reporting purposes in 2017, assuming that it uses the carryback provisions, and that the tax rate is 30% for all periods affected, is:________ a) $0. $650,000 loss. b) $540,000 loss. c) $195,000 loss.

Answer 1

Answer: $525,000 loss

Explanation:

2017 taxable and financial loss = $750,000

Pretax financial income :

2015 - $300,000

2016 - $400,000

Assuming white Inc uses the carry back provision;

With tax rate for all affected period being 30%

$750,000 - (30% of $750,000)

$750,000 - (0.3 × $750,000)

$750,000 - $225,000

= $525,000 loss