A company has $150 of NOLs on its balance sheet (as a DTA). This year it earns $250 of pretax income and uses the full NOL. Walk through the three statements (40% tax rate).

Question

IBPrep · Accepted Answer

IS: apply the $150 NOL against $250 PTI, so taxable income = $100 and cash taxes = $40. Book PTI is still $250 with a full $100 book tax expense, so NI = $150.

A company has $150 of NOLs on its balance sheet (as a DTA). This year it earns $250 of pretax income and uses the full NOL. Walk through the three statements (40% tax rate).

Answer

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