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

In 2011, 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 2011 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 2011 income statement reflecting the effect of the loss carryback andcarryforward.

Transcribed Image Text:

Year Income Tax Rate Tax Paid 2008. 2009 2010 70,000 96,600 108,500 $175,000 230,000 310.000 40% 42 35