FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Concept explainers

Deferred Tax
Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue autho…
Question

am. 134.

Recording Net Operating Loss Carryback During Year 4, Lamb Inc. suffered a tax loss of $(120,000). Lamb qualifies for a two-year loss carryback option for tax purposes, using the earliest year first and with no income restrictions. Taxable income for the last three years (listed in chronological order) follows: Year 1: $108,000; Year 2: $96,000; and Year 3: $36,000. The tax rate is 40% for Year and Year 4, and 25% for Year 1 and Year 2. Prepare Lamb's entry for the loss carryback on December 31 of Year 4. Account Name Dr. Cr. Date Dec. 31, Year 4 Deferred Tax Asset Income Tax Expense To record net operating loss carryback 0 0x 38,400 x
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Transcribed Image Text:Recording Net Operating Loss Carryback During Year 4, Lamb Inc. suffered a tax loss of $(120,000). Lamb qualifies for a two-year loss carryback option for tax purposes, using the earliest year first and with no income restrictions. Taxable income for the last three years (listed in chronological order) follows: Year 1: $108,000; Year 2: $96,000; and Year 3: $36,000. The tax rate is 40% for Year and Year 4, and 25% for Year 1 and Year 2. Prepare Lamb's entry for the loss carryback on December 31 of Year 4. Account Name Dr. Cr. Date Dec. 31, Year 4 Deferred Tax Asset Income Tax Expense To record net operating loss carryback 0 0x 38,400 x
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