Prepare journal entry to record claim for income tax refund

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Reference no: EM13970364

The following information is taken from the financial statements of Aruban Enterprises.


Taxable and Pretax

 

 

Year

Financial Income

Income Tax Rate

Income Tax Paid

2004                      

$32,000

40%

$12,800

2005                      

29,300

35

10,255

2006                      

33,100

40

13,240

2007                      

22,500

34

7,650

2008                      

(94,300)

35

0

The company elects to use the carryback provisions of the tax law.

Instructions:

1. Given the information from the financial statements, compute the amount of income tax refund due as a result of the operating loss in 2008.

2. What is the amount, if any, of the operating loss carry forward? How would the operating loss carry forward be reflected in the financial statements?

3. Assume the foregoing information except as follows:

(a) The loss in 2008 was $39,000. Calculate the refund due and prepare the journal entry to record the claim for income tax refund.

(b) In addition to (a), there was a loss of $28,000 in 2009.How much could be carried back, and how much could be carried forward?

Reference no: EM13970364

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