The historical financial data shown below are available for the Bradshaw Manufacturing Company.

In 2013, Bradshaw suffered an $820,000 net operating loss due to an economic recession. The company elects to use the carryback provision in the tax law.
1. Using the information given, calculate the refund due arising from the loss carryback and the amount of the loss available to carry forward to future periods. Assume that the enacted tax rate is 34% for 2013 and all future years.
2. Prepare the entry necessary to record the loss carryback and carryforward. Assume that there will be sufficient taxable income in the carryforward period to realize all benefits from NOL carryforwards.
3. Using the answers from (1) and (2), prepare the bottom portion of the 2013 income statement reflecting the effect of the loss carryback and carryforward.

Transcribed Image Text:

Year Income Tax Rate Tax Paid $175,000 2010 2011 2012 40% 42 30 96,600 93,000