Tobac Company reported an operating loss of $138,000 for financial reporting and

Question

Tobac Company reported an operating loss of $138,000 for financial reporting and tax purposes in 2016. The enacted tax rate is 40% for 2016 and all future years. Assume that Tobac elects a loss carryback. No valuation allowance is needed for any deferred tax assets. Taxable income, tax rates, and income taxes paid in Tobac's first four years of operations were as follows: Taxable income Tax rates Taxes paid 2012 $ 36,000 30% $ 10,800 2013 $ 41,000 30% $ 12,300 2014 $ 48,000 35% $ 16,800 2015 $ 46,000 40% $ 18,400 Required: 1. Prepare a compound journal entry to record Tobac’s tax provision for the year 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) 2. Compute Tobac's net loss for 2016.

Explanation / Answer

( Being Deffered Tax assets created on Loss)

( $ 1,38,000 * 40% = $ 55,200)

2. Tobac's net loss for 2016.

Operating Loss = $ 1,38,000

Less : Deffered Tax assets = ($ 55,200 )

$ 82,800   

S.No. Particulars Debit Credit 1. Deffered Tax Assets A/c Dr. $ 55,200 To Profit & Loss A/c $ 55,200

( Being Deffered Tax assets created on Loss)

( $ 1,38,000 * 40% = $ 55,200)

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.