Ask Question
24 July, 22:47

Cabot Company reported a pretax operating loss of $50,000 for financial reporting and tax purposes in 2018. The enacted tax rate is 40% for 2018 and subsequent years. Assume that Cabot requests a refund of taxes already paid by electing a loss carryback. Taxable income, tax rates, and income taxes paid in Cabot's first four years of operations were as follows: Taxable Tax Taxes income rates paid 2014 $30,000 30% $9,000 2015 35,000 30% 10,500 2016 42,000 35% 14,700 2017 40,000 40% 16,000 Required: (1) Prepare the journal entry to record Cabot's income taxes for the year 2018. Show well-labeled computations. (2) Compute Cabot's net loss for 2018.

+3
Answers (1)
  1. 25 July, 00:26
    0
    Answer and Explanation:

    1.

    Net Operating loss carryback Amount Rate of Tax Tax Recorded as

    Carried back - 2014 $0.0 30% $0.0

    Carried back - 2015 $0.0 30% $0.0

    Carried back - 2016 $42,000 35% $14,700.0

    Carried back - 2017 $8,000.0 40% $3,200.0

    Total Carryback $50,000.0 $17,900.0

    Journal Entries - Cabot Company

    Date Particulars Debit Credit

    31-Dec-18 Receivables - Income Tax Refund $17,900

    To Income tax benefit - Net Operating Loss $17,900

    2. Cabot's net loss for 2018 = - $50,000 + $17,900

    = ($32,100)
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Cabot Company reported a pretax operating loss of $50,000 for financial reporting and tax purposes in 2018. The enacted tax rate is 40% for ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers