Problem 3

Rite Aid Company reported an operating loss of $132,000 for financial reporting and tax purposes in 2013. The enacted tax rate is 40% for 2013 and all future years. Assume that Rite Aid elects a loss carryback. No valuation allowance is needed for any deferred tax assets. Taxable income, tax rates, and income taxes paid in Rite Aid's first four years of operations were as follows:

Tax Income Tax Rates Taxes Paid 2009 30000 30% 9000

2010 35000 30% 10500

2011 42000 35% 14700

2012 40000 40% 16000 Required: 1.) Prepare a compound journal entry to record Rite Aid's tax provision for the year 2013. Show well-labeled computations. 2.) Compute Rite Aid's net loss for 2013.