The following information is taken from the financial statements of Aruban Enterprises.

The company elects to use the carryback provisions of the tax law.

Instructions:
1. Given the information from the financial statements, compute the amount of income tax refund due as a result of the operating loss in 2011.
2. What is the amount, if any, of the operating loss carryforward? How would the operating loss carryforward be reflected in the financial statements?
3. Assume the foregoing information except as follows:
(a) The loss in 2011 was $39,000. Calculate the refund due and prepare the journal entry to record the claim for income tax refund.
(b) In addition to (a), there was a loss of $28,000 in 2012. How much could be carried back, and how much could be carriedforward?

Transcribed Image Text:

Taxable and Pretax Year Financial Income Income Tax Rate ncome Tax Paid 2007 .. 2008 2009 2010 2011 $32.000 29.300 33,100 22,500 (94.300) 40% 35 40 34 35 $12,800 0.255 13.240 7.650