Sheridan Inc. reports the following pretax income (loss) for both book and tax purposes.PretaxYear Income (Loss)$120,0002023202489,0002025 (87,000)2026120,000Tax Rate20%20%25%25%The tax rates listed were all enacted by the beginning of 2023. Prepare the journal entries for years 2023-2026 to record income tax expense (benefit) and income taxes payable (refundable),and the tax effects of the loss carryforward, assuming that based on the weight of available evidence, it is more likely than not thatone-half of the benefits of the loss carryforward will not be realized. (List all debit entries before credit entries. Credit account titles areautomatically indented when amount is entered. Do not indent manually. If rio entry is required, select "No Entry" for the account titles andenter O for the amounts. Record journal entries in the order presented in the problem.)Date Account Titles and Explanation026202320242025Income Tax ExpenseIncome Tax PayableIncome Tax ExpenseIncome Tax PayableIncome Tax Refund ReceivableDeferred Tax Asset(To record income taxes.)(To record income taxes.)(To record allowance.)(To record income taxes.)(To adjust allowance.)eTextbook and MediaDebit24,00017.800Credit24,00017,80000100

Answered: Sheridan Inc. reports the following…

Sheridan Inc. reports the following pretax income (loss) for both book and tax purposes. Year 2023 2024 2025 2026 Pretax Income (Loss) $120,000 89,000 (87,000) 120,000 Tax Rate 20% 20% 25% 25%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

Sheridan Inc. reports the following pretax income (loss) for both book and tax purposes.
Pretax
Year Income (Loss)
$120,000
2023
2024
89,000
2025 (87,000)
2026
120,000
Tax Rate
20%
20%
25%
25%
The tax rates listed were all enacted by the beginning of 2023.

Prepare the journal entries for years 2023-2026 to record income tax expense (benefit) and income taxes payable (refundable),
and the tax effects of the loss carryforward, assuming that based on the weight of available evidence, it is more likely than not that
one-half of the benefits of the loss carryforward will not be realized. (List all debit entries before credit entries. Credit account titles are
automatically indented when amount is entered. Do not indent manually. If rio entry is required, select "No Entry" for the account titles and
enter O for the amounts. Record journal entries in the order presented in the problem.)
Date Account Titles and Explanation
026
2023
2024
2025
Income Tax Expense
Income Tax Payable
Income Tax Expense
Income Tax Payable
Income Tax Refund Receivable
Deferred Tax Asset
(To record income taxes.)
(To record income taxes.)
(To record allowance.)
(To record income taxes.)
(To adjust allowance.)
eTextbook and Media
Debit
24,000
17.800
Credit
24,000
17,800
00
100

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