Question

Q1. Company ABC has the following income: 2014 $10,000 2015 $15,000 2016 $(1,000) 2017 $(30,000) 2018 $5,000 Please JEs to record loss carryback and forward for 2016, 2017 and 2018. Assume Tax rate 30%.

Answer 1

Answer)

Journal entries in 2016:

Entry	Debit	credit
Refund of tax ($1000×30%)	300
Tax expense(benefit)		300

Here,they tax refund will be received up to the extent of tax payable on loss of current year.

Journal entry for 2017:

Particular	Debit	Credit
Refund of tax [$(10000+$15000-1000)×30%]	7200
Tax expense		7200

Here, the tax carry back would be received only it the extent income on which tax paid in previous years and here the tax benefit of $1000 has been already claimed last year and $24000 tax paid incline will be deducted now.

Journal entry for 2018:

Particulars	Debit	credit
Deffered tax asset($5000×30%)	1500
Tax expense		1500

Here,the carry forward tax benefit will be permitted only up to the extent.There is still $1000 income that could be carried forward I.e out of $30000 loss in 2017 $24000 carried backward and $5000 carried forward.