Question

Tamarisk Inc. reports the following pretax income (loss) for both financial reporting purposes and tax purposes. Year Pretax Income (Loss) Tax Rate 2018 $128,000 17 % 2019 118,000 17 % 2020 (290,000 ) 19 % 2021 306,000 19 % The tax rates listed were all enacted by the beginning of 2018. Collapse question part

(a) 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)

Answer 1

1)
Account titles & Explanation	Debit	Credit
Year 2018
Income Tax Expense ($128,000 x 17%)	$ 21,760.00
Income Tax Payable		$ 21,760.00
Year 2019
Income Tax Expense ($118,000 x 17%)	$ 20,060.00
Income Tax Payable		$ 20,060.00
Year 2019
Income Tax Refund Receivable (21760 + 20,060)	$ 41,820.00
Deferred Tax Asset ($290,000 - 128000 - 118000) x 19%	$   8,360.00
Benefit Due to Loss Carryback		$ 41,820.00
Benefit Due to Loss Carryforward		$   8,360.00
Year 2020
Income Tax Expense ($306,000 x 19%)	$ 58,140.00
Income Tax Payable		$ 49,780.00
Deferred Tax Asset		$   8,360.00