Question

Windsor Corporation had the following tax information.

Year		Taxable Income		Tax Rate			Taxes Paid
2018		$390,000		35	%		$136,500
2019		422,500		30			126,750
2020		520,000		30			156,000

In 2021, Windsor suffered a net operating loss of $624,000, which it elected to carryback. The 2021 enacted tax rate is 29%.

Prepare Windsor’s entry to record the effect of the loss carryback. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

Answer 1

Solution:

Net Operating loss carryback	Amount	Rate of Tax	Tax	Recorded as
Carried back - 2019	$422,500.00	30%	$126,750.00
Carried back - 2020	$201,500.00	30%	$60,450.00
Total Carryback	$624,000.00		$187,200.00	Income tax benefit

Adjusting Journal Entries - Windsor Corporation
Event	Particulars	Debit	Credit
1	Receivables - Income Tax Refund	$187,200.00
	To Income tax benefit - Net Operating Loss		$187,200.00
	(Being income tax benefit due to loss carryback)