Question

The pretax financial income (or loss) figures for Tamarisk Company are as follows.

2016		275,000
2017		88,000
2018		(176,000	)
2019		(115,000	)
2020		148,000
2021		108,000

Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 45% tax rate for 2016, and a 20% tax rate for the remaining years.

Prepare the journal entries for the years 2017 to 2021 to record income tax expense and the effects of the net operating loss carrybacks and carryforwards assuming Tamarisk Company uses the carryback provision. All income and losses relate to normal operations. (In recording the benefits of a loss carryforward, assume that no valuation account is deemed necessary.)

Answer 1

ANSWER

Date	Particulars	Debit	Credit
2016	Income tax expense(275,000*45%)	$123,750
	Provision for income tax		$123,750
20117	Deferred tax asset(88,000*20%)	$17,600
	Income tax benefit		$17,600
2018	Deferred tax asset(176,000*20%)	$35,200
	Income tax benefit		$35,200
2019	Income tax expense(115,000*20%)	$23,000
	Deferred tax asset		$23,000
2020	Income tax expense(148,000*20%)	$29,600
	Deferred tax asset		$29,600
2021	Income tax expense(108,000*20%)	$21,600
	Provision for income tax		$21,600

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