Reference no: EM133163085
Questions -
Q1. Wheaton Inc. reported the following results for its first three years of operations:
2019 Income (before income taxes) $40,000
2020 Loss (before income taxes) (300,000)
2021 Income (before income taxes) 400,000
There were no permanent or reversible differences during these three years. Assume an income tax rate of 30% for 2019 and 2020, and 40% for 2021, and that any tax loss carryforward is more likely than not to be realized. If Wheaton elects to use the carryback provisions, what after tax net income (loss) is reported for 2020?
Q2. Big Tyre Corp.incurred a loss in 2021, which was its second year of operations. It correctly recorded the following journal entries regarding the loss, assuming that the tax loss carryforward is expected to be fully recoverable within the carryforward period.
(i) DR Income tax receivable $26,000
CR Income tax expense-currrent $26,000
(ii) DR Future income tax asset $36,000
CR Income tax expense-future $36,000
In addition, Big Tyre received tax free dividends in the amount of $20,000 in 2021.
The tax rate for 2020 was 25% and for 2021 and future years it is 30%.
How much was the loss for tax purposes and the loss for accounting purposes respectively, in 2021?