Question

Bramble Inc. reports the following pretax income (loss) for both financial reporting purposes and tax purposes.

Year		Pretax Income (Loss)			Tax Rate
2018		$117,000			17	%
2019		114,000			17	%
2020		(228,000	)		19	%
2021		307,000			19	%

The tax rates listed were all enacted by the beginning of 2018.

Prepare the journal entries for the years 2018–2021 to record income tax expense (benefit) and income taxes payable (refundable) and the tax effects of the loss carryforward, assuming that at the end of 2020 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.)

Answer 1

Answers:

Date	General Journal	Debit	Credit
2018	Income Tax Expense ($117,000 × 17%)	$       19,890
	Income Tax Payable		$       19,890
2019	Income Tax Expense ($114,000 × 17%)	$       19,380
	Income Tax Payable		$       19,380
2020	Income Tax Refund Receivable ($228,000 × 17%)	$       38,760
	Benefit Due to loss Carryback		$       38,760
2021	Income Tax Expense (307,000 × 19%)	$       58,330
	Income Tax Payable		$       58,330

Note:

The income tax refund from 2020 is not enough to carry back all the incomes in 2018 and 2019. The total taxable income in 2018 and 2019 were $231,000 and the maximum claimable loss is $228,000 . Therefore after adjustin that loss there is no loss remaining to be carry forwarded.