Question

Bramble Inc. incurred a net operating loss of $546,000 in 2017. Combined income for 2015 and 2016 was $385,000. The tax rate for all years is 40%. Bramble elects the carryback option. Assume that it is more likely than not that the entire net operating loss carryforward will not be realized in future years. Prepare all the journal entries necessary at the end of 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit (To record carryback.) (To record carryforward.)

Answer 1

Income Tax Refund Receivable	154000		=385000*40%
Benefit Due to Loss Carryback		154000
(To record carryback)
Deferred Tax Asset	64400		=(546000-385000)*40%
Benefit Due to Loss Carryforward		64400
(To record carryforward)
Benefit Due to Loss Carryforward	64400
Allowance for Deferred Tax Asset		64400
(To record allowance)