Income (Loss) Tax Rate ) ) (a) (b) (c) Account Titles and Explanation Debit Cred
ID: 2469946 • Letter: I
Question
Income (Loss)
Tax Rate
)
)
(a)
(b)
(c)
Account Titles and Explanation
Debit
Credit
Felicia Rashad Corporation has pretax financial income (or loss) equal to taxable income (or loss) from 2006 through 2014 as follows.Income (Loss)
Tax Rate
2006 $87,870 30 % 2007 121,200 30 % 2008 51,510 35 % 2009 145,440 50 % 2010 (454,500)
40 % 2011 272,700 40 % 2012 90,900 40 % 2013 318,150 40 % 2014 (181,800)
45 %Pretax financial income (loss) and taxable income (loss) were the same for all years since Rashad has been in business. Assume the carryback provision is employed for net operating losses. In recording the benefits of a loss carryforward, assume that it is more likely than not that the related benefits will be realized.
Explanation / Answer
Journal entry will be
Income tax expense 109080
Income tax payable 18028.50
Deffered Tax asset 91051.5
Applying Carry back provisions we observe as below- Carry back provisioncan be extended upto two previous years only in normal operating loss case
Year Income Tax Rate Tax Loss recovered Loss unrecovered 2008 51510 0.35 18028.5 18028.5 163771.5 2009 145440 0.5 72720 72720 91051.5 2010 -454500 0.4 181800 - - 2011 272700 0.4 109080 91051.5 0