Colorado Company has provided you the following information:YearTaxable incomeIncome tax rate2018$390,000 35% 2019$320,000 37% 2020$400,000 40% 2021$(1,200,000) 40% Colorado has decided to use the loss carryback and carryforward provision as a result of the year 2021 loss. The enacted tax rate remains at 40% after year 2021. Colorado has determined that a valuation allowance is not necessary. Requirement:Prepare the journal entry on December 31, 2021 to record the carryback and carryforward decision.
What will be an ideal response?
| Income tax refund receivable | 278,400 (1) | |||
| Deferred tax asset | 192,000 (2) | |||
| Income tax expense (carryback benefit) | 278,400 | |||
| Income tax expense (carryforward benefit) | 192,000 |
(2) ($1,200,000 ? $320,000 ? $400,000) × 0.40
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