Flyte Annivare Corporation [FAC] having a fiscal year end of December 31, reporting under ASPE, was incorporated
Question:
Flyte Annivare Corporation [FAC] having a fiscal year end of December 31, reporting under ASPE, was incorporated in January, 2014. It experienced a $600,000 net operating loss for tax purposes in 2016 due to a prolonged labour strike. FAC never had a strike in the past that significantly affected its income and does not expect such a strike in the future. Additionally, there is no other negative evidence concerning future operating income. For the years 2014 and 2015, FAC reported taxable incomes of 170,000 and $280,000 respectively.
There were no differences between pretax accounting income (loss) and taxable income (loss) for all years. The income tax rates were 20% for 2014, 35% for 2015, 40% for 2016 onwards. The company intends to carry back, to the maximum extent, the net operating loss to the profit years 2014-2015. The remainder will then be carried forward to future periods.
In 2016, what amounts should FAC: (1) report in its income statement as the reduction of the loss due to the income tax recovered by the loss carry back; (2) the reduction of the loss and due to the loss carry forward; and (3) any related asset/[liability] on the balance sheet as at December 31?
Select one:
a. $132,000; loss carry forward - $60,000; future income tax asset- $60,000
b. $132,000; loss carry forward - $150,000; future income tax asset-$150,000
c. $180,000; loss carry forward - $60,000; future income tax asset- $0
d. $180,000; loss carry forward - $60,000; future income tax asset- $240,000
e. None of the above.
