Loss carryback: The process of utilizing the previous year profit to compensate the losses incurred during the current year is termed as loss carryback. The immediate previous year should be considered first for compensating the loss. The company can also claim the loss as their refund of tax paid.
Loss carry forward: The process of utilizing the next year or future year profits to compensate the loss of the current year is termed as loss carry forward. The viability of the same is not certain because the company may incur a loss also in future.
(a)
To prepare: To prepare the journal entries for the year 2017-2019 to record the income tax expenses.
(b)
(b)
To prepare: To prepare the income tax refund receivable and deferred tax asset in the balance sheet of the company.
(c)
(c)
To prepare: To prepare the income statement for the year 2017.
Given and calculated information for 2017: Pretax financial income for the year 2017 is ($180,000), Benefit due to loss carry back is $47,000 and Benefit due to loss carry forward is $20,000.
(d)
(d)
To prepare: To prepare the income statement for the year 2018.
Given and calculated information for the year 2018: Deferred tax asset for the year 2018 is $20,000 and Income taxes payable for 2018 is $8,000.
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