Question

Alpha company reported positive net income in year 1 and year 2 before sustaining a significant loss in year 3. all of the year 3 loss can be carried back against the income of years 1 and 2 for purposes of determining the company's year 3 income tax liability. how should the carryback be presented int he company's year 3 financial statements?

Answer 1

The income-tax gain will lower the loss operating on the statement of income

Step-by-step explanation:

The Company has the choices of offset the income of last yea by a method of taken back of year current loss, this will lead to a payback of tax already with jurisdiction.

However, because its a gain to the company this should appear as a benefit in tax in statement of loss and profit which will decrease the loss on the statement of income,therefore, we have the following:

Before the income tax, Operating loss x (XXXX)

The Tax expense XXXX

The Net loss after tax (XXXX)

Answer 2

Answer: As an income-tax benefit that reduces the operating loss on the income statement.

Step-by-step explanation:

One of the option a Company has as a way of offset the income of previous years is by way of carry back of current year loss, this will result in the refund of tax already with the authority. Since its a benefit to the company this should be shown as a tax benefit in statement of profit and loss which help to reduces the loss on the income statement therefore the carryback be presented into the company's Year 3 financial statements- As an income-tax benefit that reduces the operating loss on the income statement. .

Operating loss before income tax (XXXX)

Tax expense XXXX

Net loss after tax (XXXX)