Question

In 2018, Bodily Corporation reported $300,000 pretax accounting income. The income tax rate for that year was 30%. Bodily had an unused $120,000 net operating loss carryforward from 2014 when the tax rate was 40%. Bodily's income tax payable for 2016 would be:

a. $90,000
b. $72,000
c. $54,000
d. $42,000

Answer 1

Bodily's income tax payable for 2016 would be 54000

Step-by-step explanation:

Tax for the year 2016 = 300000*30% i.e 90000

Loss set off = 120000

Tax saving on loss set off = 120000*0.30 i.e 36000

Net tax expense for the year 2016 = 90000-36000

i.e 54000