Comprehensive
Response to the following problem:
Jayryan Company sells products in a volatile market. The company began operating in 2008 and reported (and paid taxes on) taxable income in 2008 and 2009. It has one taxable temporary difference (future taxable amount), and reconciled its taxable income to its pretax financial income for 2008 and 2009 as follows:
|
|
2008
|
2009
|
|
Taxable income
|
$25,000
|
$53,000
|
|
Temporary difference
|
2,500
|
4,800
|
|
Pretax financial income
|
$27,500
|
$57,800
|
In 2010, because of a downturn in the market, the company reported a taxable loss of $90,000 and it was uncertain as to future profits. A temporary difference of $2,700 resulted in an $87,300 pretax operating loss for financial reporting. In 2011 and 2012, the company was again profitable and reported the following items:
|
|
2011
|
2012
|
|
Taxable income
|
$7,000
|
$19,000
|
|
Temporary difference
|
2,300
|
2,800
|
|
Pretax financial income
|
$9,300
|
$21,800
|
The income tax rate has been 30% since 2006 and no change in the tax rate has been enacted for future years.
Required:
1. Prepare a schedule that shows the Jayryan Company's income taxes payable (or receivable) for each year, 2008 through 2012.
2. Prepare a schedule that shows the deferred tax information (change in temporary difference and operating loss carryforward) for each year, 2008 through 2012.
3. Prepare a schedule that shows the deferred taxes for each year, 2008 through 2012.
4. Based on the schedule prepared in Requirement 3, prepare the income tax journal entry at the end of 2010.
5. Prepare a partial income statement for 2010. Include a note for any operating loss carryforward.