(NOL Carryback and Carryforward, Valuation Account Needed) Meyer reported the following pretax financial income (loss) for the years 2015–2019. 2015 $240,000 2016 350,000 2017 120,000 2018 (570,000) 2019 180,000 Pretax financial income (loss) and taxable income (loss) were the same for all years involved. The enacted tax rate was 34% for 2015 and 2016, and 40% for 2017–2019. Assume the carryback provision is used first for net operating losses.Instructions(a) Prepare the journal entries for the years 2017–2019 to record income tax expense, income taxes payable (refundable), and the tax effects of the loss carryback and loss carryforward, assuming that based on the weight of available evidence, it is more likely than not that one-fifth of the benefits of the loss carryforward will not be realized.(b) Prepare the income tax section of the 2018 income statement beginning with the line “Income (loss) before income taxes.”
(NOL Carryback and Carryforward, Valuation Account Needed) Meyer reported the following pretax financial income (loss) for the years 2015–2019.
| 2015 | $240,000 |
| 2016 | 350,000 |
| 2017 | 120,000 |
| 2018 | (570,000) |
| 2019 | 180,000 |
Pretax financial income (loss) and taxable income (loss) were the same for all years involved. The enacted tax rate was 34% for 2015 and 2016, and 40% for 2017–2019. Assume the carryback provision is used first for net operating losses.
Instructions
(a) Prepare the
(b) Prepare the income tax section of the 2018 income statement beginning with the line “Income (loss) before income taxes.”
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