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  • Loss Carryforward

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    WL Inc. had profits from 2015-2018 but losses in 2019. They can carry the 2019 $6 million loss back to prior years, reducing taxable income. This creates a $1.79 million income tax receivable. WL can also carry the remaining $435,000 loss forward, creating a $693,000 deferred tax asset. In 2020, WL had profits and the deferred tax asset is reduced by $187,000.

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    WL Inc. had profits from 2015-2018 but losses in 2019. They can carry the 2019 $6 million loss back to prior years, reducing taxable income. This creates a $1.79 million income tax receivable. WL can also carry the remaining $435,000 loss forward, creating a $693,000 deferred tax asset. In 2020, WL had profits and the deferred tax asset is reduced by $187,000.

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    © All Rights Reserved
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    11 views1 page

    Loss Carryforward

    Uploaded by

    ryanclarke628
    WL Inc. had profits from 2015-2018 but losses in 2019. They can carry the 2019 $6 million loss back to prior years, reducing taxable income. This creates a $1.79 million income tax receivable. WL can also carry the remaining $435,000 loss forward, creating a $693,000 deferred tax asset. In 2020, WL had profits and the deferred tax asset is reduced by $187,000.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
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    of 1

    LOSS CARRYFORWARD

    Below is the earnings history of Winsim Lossem Inc. (WL) Inc.

    Tax Rate

    2015 $ 900,000 42%


    2016 600,000 40%
    2017 1,250,000 40%
    2018 2,500,000 42%
    2019 (6,000,000) 42%
    2020 500,000 44%

    WL have consulted you on the use of the loss and the recovery of taxes. What should
    WL report on their Statement of Financial Position assuming the entity elects to apply
    the loss to prior year and believes it is probable that sufficient taxable income will be
    generated in the future to absorb any loss carry-forward. Tax rates were enacted in each
    year shown.

    2015 2016 2017 2018 2019 2020


    900,000 600,000 1,250,000 2,500,000 (6,000,000) 500,000
    4350000 (1650000)
    4 years back 0.4 0.4 0.42 1650000 1150000
    So no loss 0.42 0.44
    240000 500000 1050000 693000 506000
    Sum all 3: 1790000 Sum both: 187000
    Sum of taxable incomes with loss carry= 4350000
    2019
    Income tax receivable 1790000
    Income tax expense 1790000
    Deferred tax asset 693000
    Deferred tax expense 693000

    2020
    Deferred tax expense 187000
    Deferred tax asset 187000

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