Question

Apple reported the following pre tax income (loss) during 2010-2017

	Income (Loss)	Tax Rate	Date rate enacted into law
2010	180,000	35%	1/1/02
2011	125,000	35%
2012	60,000	35%
2013	80,000	35%
2014	70,000	38%	1/1/14
2015	(200,000)	40%	1/1/15
2016	80,000	40%
2017	220,000	35%	1/1/17

There are no temporary or permanent differences between taxable income and EBIT for ALL years

Assume Apple will elect to carryback losses to the extent possible

Also assume that at 12/31/15 Apple is reasonably confident that they will have $30,000 of taxable income in 2016

Required:

A) prepare journal entries for 2010-2017 for income tax expenses/benefit.

B) Draft the lower portion of the 2015 income statement starting with EBIT

C) Draft the lower portion of 2016 Income statement starting with EBIT

Answer 1

Description				Debit	Credit
2010	Income Tax Expense			63000
	Cash				63000
	( Income Tax Paid)
2011	Income Tax Expense			43750
	Cash				43750
	( Income Tax Paid)
2012	Income Tax Expense			21000
	Cash				21000
	( Income Tax Paid)
2013	Income Tax Expense			28000
	Cash				28000
	( Income Tax Paid)
2014	Income Tax Expense			26600
	Cash				26600
	( Income Tax Paid)
2015	Income Tax Credit			80000
	Income Tax				80000
	( credit on loss earned)
2016	Income Tax Expense			32000
	Income Tax Credit				32000
	( Income Tax Paid)
2017	Income Tax Expense			88000
	Income Tax Credit				48000
	Cash				40000
	( Income Tax Paid)
2.)/3.)
		2015	2016	2017
Profit/Loss		-200000	80000	220000
Less:-
Income Tax Exp/credit		-80000	32000	88000
Loss		-120000	48000	132000

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