Pretax Income (loss) Tax Rate Date Account Titles and Explanation Debit Credit 2
ID: 2416988 • Letter: P
Question
Pretax Income (loss)
Tax Rate
Date
Account Titles and Explanation
Debit
Credit
2014
(To record carryback.)
(To record carryforward.)
2015
2016
Jennings Inc.
Income Statement (Partial)
Year ended December 31, 2014
Jennings Inc.
Income Statement (Partial)
Year ended December 31, 2015
Pretax Income (loss)
Tax Rate
2010 $41,300 30 % 2011 33,600 30 % 2012 53,400 30 % 2013 87,500 40 % 2014 (184,400 ) 45 % 2015 72,000 40 % 2016 100,400 35 %Pretax financial income (loss) and taxable income (loss) were the same for all years since Jennings began business. The tax rates from 2013–2016 were enacted in 2013.
Explanation / Answer
Pretax Income (loss) Tax Rate Income Tax Carryback from 2014 Taxable Income Carryover Revised Income tax Refund of tax throgh carryback DTA(carryforward) 2010 $41,300 30 % $12,390 2011 33,600 30 % $10,080 2012 53,400 30 % $16,020 -53400 0 0 2013 87,500 40 % $35,000 -87,500 0 0 2014 -184,400 45 % -43500 -43500 -19575 51020 -19575 2015 72,000 40 % $28,800 $9,225 2016 100,400 35 $35,140 2014 loss will be carryback for 2 years and losses must be applied to earlier year first Now the availbale balance for 2013 is $131000 but the income of 2013 is $87500 so it is maximun upto $87500 Now the balance remaining after carryback=$131000-$87500= 43500 Now $43500 is carryforward amount and 45% on it=$19575 is DTA creaated Accounts Title Dr Cr 2014 Income Tax Refund Receivable $51,020 Benefit Due to Loss carryback $51,020 Deferred Tax asset 19575 Benefit due to loss carryforward 19575 2015 Benefit due to loss carryforward 19575 Deferred Tax asset 19575 Income tax Expense 9225 Income Tax Payable 9225 2016 Income tax Expense 35140 Income Tax Payable 35140 Decemeber 2014 Operating loss before Income Tax -184,400 Less: Carryback 140,900 Taxable Income -43,500 Income Tax(DTA) -19575 Decemeber 2015 Income Before Income Tax 72,000 Income Tax @ 40% 28800 Less: DTA -19575 Income Tax payable 9225
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