Assume that Sharp operates in an industry for which NOL carryback is allowed. In its first three years of operations Sharp reported the following operating income (loss) amounts: 2019 $ 1,350,000 2020 (3,150,000 ) 2021 5,400,000 There were no deferred income taxes in any year. In 2020, Sharp elected to carry back its operating loss. The enacted income tax rate was 25% in 2019 and 30% thereafter. In its 2021 balance sheet, what amount should Sharp report as current income tax payable?

In its first three years of operations Sharp reported the following operating income (loss) amounts: 2019 $ 1,350,000 2020 (3,150,000 ) 2021 5,400,000

There were no deferred income taxes in any year. In 2020, Sharp elected to carry back its operating loss.

The enacted income tax rate was 25% in 2019 and 30% thereafter.

In its 2021 balance sheet, what amount should Sharp report as current income tax payable is the applicable tax rate for 2021 applied on the income of the year: 30% x 5,400,000 = $1,620,000

jepessoa jepessoa · Answer 2 · 2020-04-02T00:43:16+02:00

Answer:

current income tax payable = $1,012,500

Explanation:

year profit/loss taxes

2019 $1,350,000 $337,500

2020 ($3,150,000) ($945,000)

2021 $5,400,000 $1,620,000

Since Sharp decided to carry back their NOL for 2020, they cancel out of their 2019 taxes, and $607,500 are left to carry forward for 2021. Net taxes due in 2021 after NOL carry forward = $1,620,000 - $607,500 = $1,012,500