Sage Hill Inc. incurred a net operating loss of $440,000 in 2025. Combined income for 2023 and 2024 was $308,000. The tax rate for all years is 20%. Sage Hill elects the carryback option. Prepare the journal entries to record the benefits of the loss carryback and the loss carryforward. Sage Hill expects to return to profitability in 2026. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation (To record loss carryback) (To record loss carryforward) Debit Credit

Sage Hill Inc. incurred a net operating loss of $440,000 in 2025. Combined income for 2023 and 2024 was $308,000. The tax rate for all years is 20%. Sage Hill elects the carryback option. Prepare the journal entries to record the benefits of the loss carryback and the loss carryforward. Sage Hill expects to return to profitability in 2026. (List all debit entries before credit entries. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Account Titles and Explanation (To record loss carryback) (To record loss carryforward) Debit Credit

SWFT Individual Income Taxes

43rd Edition

ISBN:9780357391365

Author:YOUNG

Publisher:YOUNG

Chapter13: Tax Credits And Payment Procedures

Section: Chapter Questions

Problem 25P

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It is February 16, 2020, and you are auditing Davenport Corporation's financial statements for 2019 (which will be issued in March 2020). You read in the newspaper that Travis Corporation, a major customer of Davenport, is in financial difficulty. Included in Davenports accounts receivable is 50,000 (a material amount) owed to it by Travis. You approach Jim Davenport, president, with this information and suggest that a reduction of accounts receivable and recognition of a loss for 2019 might be appropriate. Jim replies, Why should we make an adjustment? Ted Travis, the president of Travis Corporation, is a friend of mine; he will find a way to pay us, one way or another. Furthermore, this occurred in 2020, so lets wait and see what happens; we can always make an adjustment later this year. Our 2019 income and year-end working capital are not that high; our creditors and shareholders wouldnt stand for lower amounts than they already are. Required: From financial reporting and ethical perspectives, prepare a response to Jim Davenport regarding this issue.
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