Question

Novak Corporation had the following tax information: Year Taxable Income Tax Rate Taxes Paid 2017 $391,000...

Novak Corporation had the following tax information:

Year Taxable Income Tax Rate Taxes Paid

2017

 $391,000 31% $121,210

2018

 313,000 30% 93,900

2019

 401,900 30% 120,570


In 2020, Novak suffered a net operating loss of $564,000, which it decided to carry back. The 2020 enacted tax rate is 25%.

Prepare Novak’s entry to record the effect of the loss carryback. (Credit account titles are automatically indented when the 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.)

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Homework Answers

Answer #1

Solution:

Loss carry back to 2018 = $313,000

Loss carryback to 2019 = $564,000 - $313,000 = $251,000

Income tax refund = ($313,000*30%) + ($251,000*30%) = $169,200

Journal Entries
Event Particulars Debit Credit
1 Receivables - Income Tax Refund $169,200.00
           To Income tax benefit - Net Operating Loss $169,200.00
(Being income tax benefit due to loss carryback recorded)
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