Question

Nash Inc. reports the following pretax income (loss) for both financial reporting purposes and tax purposes. (Assume the carryback provision is used for a net operating loss.) Year Pretax Income (Loss) Tax Rate 2015 $127,000 34 % 2016 93,000 34 % 2017 (284,000 ) 38 % 2018 237,000 38 % The tax rates listed were all enacted by the beginning of 2015.

(a) Prepare the journal entries for the years 2015–2018 to record income tax expense (benefit) and income taxes payable (refundable) and the tax effects of the loss carryback and carryforward, assuming that at the end of 2017 the benefits of the loss carryforward are judged more likely than not to be realized in the future. (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 2015 2016 2017 2018

Answer 1

Solution:

Journal Entries - Nash Inc.
Year	Particulars	Debit	Credit
2015	Income tax expense Dr	$43,180.00
	To Income taxes payable		$43,180.00
	(To record income tax expense)
2016	Income tax expense Dr	$31,620.00
	To Income taxes payable		$31,620.00
	(To record income tax expense)
2017	Income tax refund receivables Dr	$74,800.00
	Deferred tax assets Dr	$24,320.00
	To Income taxes benefits - Net operating loss		$99,120.00
	(To record income tax expense)
2018	Income tax expense Dr	$90,060.00
	To Income taxes payable [($237,000 - $64,000)*38%]		$65,740.00
	To Deferred tax liability		$24,320.00
	(To record income tax expense)