2. Tobac Company reported an operating loss of $130,000 for financial reporting. The loss includes: 1) a penalty of...
New solution updates
2. Tobac Company reported an operating loss of $130,000 for financial reporting. The loss includes: 1) a penalty of $16,000 assessed by the Environmental Protection Agency for violation of a federal law and paid in 2009, 2) a warranty expense of $8,000 accrued in 2009 and to be paid in 2010. The enacted tax rate is 40% for 2009 and all future years. Assume that Tobac elects a loss carryback. The balances of deferred tax assets and deferred tax liability at the end of 2008 are 0. At the end of 2009, Tobac estimates that it is more likely than not that 40% of the deferred tax assets will ultimately be utilized. Taxable income, tax rates, and income taxes paid in Tobac's first four years of operations were as follows
taxable income tax rate taxes paid
2005 30,000 30% 9,000
2006 35,000 30% 10,500
2007 42,000 35% 14,700
2008 40,000 40% 16,000
Note: accounting loss is not the same as tax-basis net operating loss. Required: 1.) Prepare journal entries to record its income tax for the year 2009. 2.) Compute Tobac's net loss for 2009.
Solution ID:436767 | This paper was updated on 26-Nov-2015Price : $25