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Chapter 19: Question 12BE (page 1094)

Conlin Corporation had the following tax information. Year Taxable Income Tax Rate Taxes Paid 2015 \(300,000 35% \)105,000 2016 325,000 30 97,500 2017 400,000 30 120,000 In 2018, Conlin suffered a net operating loss of $480,000, which it elected to carry back. The 2018 enacted tax rate is 29%. Prepare Conlin鈥檚 entry to record the effect of the loss carryback.

Short Answer

Expert verified

Loss carrybackis used when an organization faces anet operating lossin thecurrent yearand tries to adjust theloss amount to the previous year'sincome tax return.

Step by step solution

01

Computation of loss carryback amount

LossCarryback=Taxespaid2016+[(Netoperatingloss-TaxableIncome2016脳Taxrate2016]=$97,500+[($480,000-$325,000)脳30%]=$97,500+$46,500=$144,000

02

Journal entry

Conlin Corporation
Journal Entry

Date

Particulars

Debit

Credit

2018

Income tax refund receivables

$144,000

Benefit due to loss carryback

$144,000

(To record the loss carryback)

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Most popular questions from this chapter

Youngman Corporation has temporary differences at December 31, 2017, that result in the following deferred taxes.

Deferred tax asset $24,000

Deferred tax liability 69,000

Indicate how these balances would be presented in Youngman鈥檚 December 31, 2017, statement of financial position.

Stephens Company has a deductible temporary difference of \(2,000,000 at the end of its first year of operations. Its tax rate is 40 percent. Stephens has \)1,800,000 of income taxes payable. After a careful review of all available evidence, Stephens determines that it is probable that it will not realize \(200,000 of this deferred tax asset. On Stephens Company鈥檚 statement of financial position at the end of its first year of operations, what is the amount of deferred tax asset?

(a) \)2,000,000. (c) \(800,000.

(b) \)1,800,000. (d) $600,000.

Describe the procedure(s) involved in classifying deferred tax amounts on the statement of financial position under IFRS.

The following information is available for Wenger Corporation for 2016 (its first year of operations). 1. Excess of tax depreciation over book depreciation, \(40,000. This \)40,000 difference will reverse equally over the years 2017鈥�2020. 2. Deferral, for book purposes, of \(20,000 of rent received in advance. The rent will be recognized in 2017. 3. Pretax financial income, \)300,000. 4. Tax rate for all years, 40%. Instructions (a) Compute taxable income for 2016. (b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2016. (c) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2017, assuming taxable income of $325,000.

Use the information for Rode Inc. given in IFRS19-7. Assume that it is probable that the entire net operating loss carryforward will not be realized in future years. Prepare the journal entry(ies) necessary at the end of 2017.
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