The pretax financial income(or loss) figures for Synergetics Company are as foll

Question

The pretax financial income(or loss) figures for Synergetics Company are as follows.

2006 $160,000
2007 250,000
2008 90,000
2009 (160,000)
2010 (350,000)
2011 120,000
2012 100,000

Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 45% tax rate for 2006 and 2007 and a 40% tax rate for the remaining years.

Prepare the journal entries for the years 2008 to 2012 to record income tax expense and the effects of the net operating loss carrybacks and carryforwards assuming Synergetics Company uses the carryback provision. All income and losses relate to normal operations.( In recording the benefits of a loss carryforward, assume that no valuation account is deemed necessary.)

Explanation / Answer

Sl no Particulars Amount Amount 2008 Income Tax Expense A/c (90,000 * 40%) $ 36,000           To Income Tax Payable A/c $       36,000 2009 Income Tax Refund Receivable A/c (160,000 * 45%) $ 72,000           To Benefit Due to Loss Carryback A/c $       72,000 2010 Income Tax Refund Receivable A/c (90,000 * 40%_ $ 36,000           To Benefit Due to Loss Carryback A/c $       36,000 Deferred Tax Asset A/c (350,000-90,000)*40% $ 104,000           To Benefit Due to Loss Carryforward A/c $     104,000 2011 Income Tax Expense A/c (120,000 * 40%) $ 48,000           To Deferred Tax Asset A/c $       48,000 2012 Income Tax Expense A/c (100,000 * 40%) $ 40,000           To Deferred Tax Asset A/c $       40,000

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