During Year 4, Lamb Inc. suffered a tax loss of $(360,000). 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: $324,000; Year 2: $288,000; and Year 3: $108,000. The tax rate is 40% for Year 3 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. Date Account Name Dec. 31, Year 4 Income Tax Refund Receivable Income Tax Expense To record net operating loss carryback Dr. Cr. 196,200 0 x 0 196,200 x
During Year 4, Lamb Inc. suffered a tax loss of $(360,000). 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: $324,000; Year 2: $288,000; and Year 3: $108,000. The tax rate is 40% for Year 3 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. Date Account Name Dec. 31, Year 4 Income Tax Refund Receivable Income Tax Expense To record net operating loss carryback Dr. Cr. 196,200 0 x 0 196,200 x
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Recording Net Operating Loss Carryback
During Year 4, Lamb Inc. suffered a tax loss of $(360,000). 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: $324,000; Year 2: $288,000; and Year 3: $108,000. The tax rate is 40% for Year 3 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.
Date
Account Name
Dec. 31, Year 4 Income Tax Refund Receivable
Income Tax Expense
To record net operating loss carryback
Dr.
Cr.
196,200
0 x
0
196,200 ×
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