Meyer reported the following pretax financial income (loss) for the years 2012-2
ID: 2555403 • Letter: M
Question
Meyer reported the following pretax financial income (loss) for the years 2012-2016
2012 $240,000
2013 200,000
2014 150,000
2015 (500,000)
2016 180,000
pretax financial income (loss) and taxable income (loss) were the same for all the years involved. The enacted tax rate was 34% for 2012 and 2013 and 38% for 2014-2016. Assume the carryback provision is used first for net operating losses. In 2015, based on the weight of available evidence, it is more likely than not that one-fifth of the benefits of the loss carryforward will not be realized.
Prepare the journal entries for 2015 ?
Explanation / Answer
Solution:
Net Operating loss carryback Amount Rate of Tax Tax Recorded as Carried back - 2012 $0.00 34% $0.00 Carried back - 2013 $200,000.00 34% $68,000.00 Carried back - 2014 $150,000.00 38% $57,000.00 Total Carryback $350,000.00 $125,000.00 Income tax benefit Net Operating loss Carryforward Carried forward $150,000.00 Realisable benefits of loss carry forward $120,000.00 38% $45,600.00 Deferred tax assets