Felicia Rashad Corporation has pretax financial income (or loss) equal to taxabl

Question

Felicia Rashad Corporation has pretax financial income (or loss) equal to taxable income (or loss) from 2006 through 2014 as follows.

Income (Loss)

Tax Rate

Pretax financial income (loss) and taxable income (loss) were the same for all years since Rashad has been in business. Assume the carryback provision is employed for net operating losses. In recording the benefits of a loss carryforward, assume that it is more likely than not that the related benefits will be realized.

1. What entries for income taxes should be recorded for 2010?

Account Titles and Explanation

Debit

Credit

(To record carryback.)

(To record carryforward.)

Income (Loss)

Tax Rate

2006 $73,370 30 % 2007 101,200 30 % 2008 43,010 35 % 2009 121,440 50 % 2010 -379,500 40 % 2011 227,700 40 % 2012 75,900 40 % 2013 265,650 40 % 2014 -151,800 45 %

Explanation / Answer

Sl no Particulars Amount Amount 2008 Income Tax Expense A/c (90,000 * 40%) $ 36,000           To Income Tax Payable A/c $       36,000 2009 Income Tax Refund Receivable A/c (160,000 * 45%) $ 72,000           To Benefit Due to Loss Carryback A/c $       72,000 2010 Income Tax Refund Receivable A/c (90,000 * 40%_ $ 36,000           To Benefit Due to Loss Carryback A/c $       36,000 Deferred Tax Asset A/c (350,000-90,000)*40% $ 104,000           To Benefit Due to Loss Carryforward A/c $     104,000 2011 Income Tax Expense A/c (120,000 * 40%) $ 48,000           To Deferred Tax Asset A/c $       48,000 2012 Income Tax Expense A/c (100,000 * 40%) $ 40,000           To Deferred Tax Asset A/c $       40,000

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