Operating Loss
Response to the following problem:
At the end of 2010, Keil Company reports a pretax operating loss of $80,000 for both financial reporting and income tax purposes. Prior to 2010 the company had been successful and had reported and paid taxes on the following pretax financial income and taxable income: 2007, $37,000; 2008, $50,000; and 2009, $54,000. The company had been subject to tax rates of 20% in 2007, 25% in 2008, and 30% in 2009.
Required
1. Prepare the income tax journal entry of the Keil Company at the end of 2010.
2. Prepare the lower portion of Keil's 2010 income statement.