Answer:
Step-by-step explanation:
Given that:
Indigo Corporation had the following tax information.
Year Taxable Income Tax Rate Taxes Paid
2015 $294,000 35% $102,900
2016 332,000 30% 99,600
2017 399,000 30% 119,700
In 2018, Indigo suffered a net operating loss of $487,000, which it elected to carry back. The 2018 enacted tax rate is 26%.
The objective is to prepare the Indigo's entry to record the effect of the loss carryback.
The Income Tax Refund Receivable = Taxable income(2018) × Tax rate(2018) + ( net operating loss - Taxable income(2018) ) × Tax rate(2018)
(332000 × 30%)+(476000-332000) × 30%
The Income Tax Refund Receivable = (332000 × 0.30)+(476000-332000) × 0.30
The Income Tax Refund Receivable = 99600 + 144000× 0.30
The Income Tax Refund Receivable = 99600 + 43200
The Income Tax Refund Receivable = 142800
Therefore, Indigo Corporation ENtry can be prepared as follows:
Account titles Debit Credit
Income Tax Refund Receivable 142800
Benefit Due to Loss Carryback 142800
To record the effect of the loss carryback