Question

There were no permanent or temporary differences during these three years. Assume a corporate tax rate of 20% for 2019, 2020, and 2021. If Hughes decides to use the carryforward provision, what income (loss) is reported in 2020?

Answer 1

Hello your question is incomplete below is the missing part of the question

Hughes Corporation reported the following results for its first three years of operation: 2019 income (before income taxes) $ 300,000, 2020 loss (before income taxes) (2,700,000) 2021 income (before income taxes) 3,000,000

Answer : -$2160000 ( loss incurred )

Step-by-step explanation:

Calculate the income ( loss ) as reported in 2020

First we calculate the deferred tax assets For loss carryforward to 2021

= 2020 loss (before income taxes ) * corporate tax rate

$2,700,000*20% = $540,000

Hence

Income (loss) as reported in 2020

= -$2,700,000 + $540,000

= $540,000 - $2,700,000

= -$2,160,000 ( loss incurred )