Please provide all steps Cisco Inc. had a pretax accounting loss of $55 million

Question

Please provide all steps

Cisco Inc. had a pretax accounting loss of $55 million in 2014. The enacted tax rate is 40% for 2014. There are no differences between the financial accounting income and taxable income. The following is Cisco's taxable income for the five previous years: Prepare the journal entry on 12/31/14 to record the income tax benefit of the loss, assuming they elect the 2 year carry back. Prepare the journal entry on 12/31/14 to record the income tax benefit of the loss, assuming they elect the carry-forward option.

Explanation / Answer

Income Tax refund Receivable A/c Dr. 20.5

To Benefit Due to loss carry back A/c 20.5

The benefit due to loss carry back is a current tax benefit in the income statement and Income Tax refund receivable is a currnent asset in the balance sheet

Deferred Tax Asset A/c Dr 22

To Profit and Loss A/c or Reserves A/c 22

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