. Ardelow company has the following information about their income: Year Net Inc

Question

.   Ardelow company has the following information about their income:

Year                Net Income/Loss                       Tax Rate

2009                        $60,000                                35%

2010                        $45,000                                35%

2011                        $40,000                                40%

2012                      ($125,000)                            40%

2013                          $30,000                              40%

            The company elects the loss carryback and carry-forward provisions. Determine the Income Tax Refund Receivable and Deferred Tax Asset amounts for 2012. (Note: You MUST show all work, including the income tax amounts and tax rates used to determine your answer). To which year will Ardelow first apply the carryback provision?

Explanation / Answer

Deferred Tax Asset amount for 2012 :

($125,000)*40%=$50,000

Since in financial year 2012 , there is a loss of $50,000 . Therefore ,in next financial year ending 2013 , Ardelow first apply the carryback provision . And such loss is allowed to be carried forward for next financial years as well if such loss is not completely set off in finanacial year 2013 .

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