Problem: Flounder Inc. reports the following pretax income (loss) for both book and tax purposes. (Assume the carry back provision is used where possible for a net operating loss.)
|
Year
|
Pretax Income (Loss)
|
Tax Rate
|
|
2015
|
$109,000
|
40%
|
|
2016
|
84,000
|
40%
|
|
2017
|
-303,000
|
45%
|
|
2018
|
132,000
|
45%
|
The tax rates listed were all enacted by the beginning of 2015.
Required: Prepare the journal entries for years 2015-2018 to record income tax expense (benefit) and income taxes payable (refundable), and the tax effects of the loss carry back and loss carry forward, assuming that based on the weight of available evidence, it is more likely than not that one-half of the benefits of the loss carry forward will not be realized.
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