Question

Swifty reported the following pretax financial income (loss) for the years 2020–2022. 2020 $100,800 2021 (126,000) 2022 151,200 Pretax financial income (loss) and taxable income (loss) were the same for all years involved. The enacted tax rate was 20% for 2020-2022.

(a) Prepare the journal entries for the years 2020–2022 to record income tax expense, income taxes payable, and the tax effects of the loss carryforward, assuming that based on the weight of available evidence, it is more likely than not that one-fifth of the benefits of the loss carryforward will not be realized. (Credit account titles are automatically indented when 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.) Date Account Titles and Explanation Debit Credit 2020 2021 (To record refund) (To record allowance) 2022 (To record income taxes) (To adjust allowance)

Answer 1

Answer:

a.)

Date	Particulars	Debit ($)	Credit ($)
2020	Income tax expense (100800*20%)	20160
	Income tax payable		20160
	(To record income tax payable)
2021	Income tax refund receivable	20160
	Deferred tax asset	5040
	Benefit due to loss carryback (100800*20%)		20160
	Benefit due to loss carry forward (126000-100800)*20%		5040
	(To record deferred tax asset asset and income tax expense)
	Benefit due to loss carryforward	1008
	Allowance to reduce deferred tax asset to expected relaizable value (5040*1/5)		1008
	(To record 1/5th benefit not realized)
2022	Income tax expense (151200*20%)	30240
	Deferred tax asset		5040
	Income tax payable (151200-(126000-100800))*20%		25200
	(To record income tax expense)
	Allowance to reduce deferred tax asset to expected realizable value	1008
	Benefit due to loss carryforward		1008