Theodore Enterprises had the following pretax income (loss) over its first three years of operations: For each year there were no deferred income taxes and the tax rate was 30%. In its 2008 tax return, Theodore elected a loss carryback. No valuation account was deemed necessary for the deferred tax asset as of December 31, 2008. What was Theodore's income tax expense for 2009?

Question

Quizplus · Accepted Answer

The loss carryback from 2008 will reduce the 2009 taxable income by $150,000 ([$500,000 x 30%] - $150,000). Thus, the taxable income for 2009 is $600,000 ($750,000 - $150,000). The income tax expense for 2009 is $180,000 ($600,000 x 30%).

Theodore Enterprises Had the Following Pretax Income (Loss) Over Its