The pretax financial income (or loss) figures for Jenny Spangler Company are as

Question

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

2009 $177,500

2010 259,900

2011 88,900

2012 (177,500 )

2013 (395,500 )

2014 131,300

2015 113,700

Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 40% tax rate for 2009 and 2010 and a 35% tax rate for the remaining years. Prepare the journal entries for the years 2011 to 2015 to record income tax expense and the effects of the net operating loss carrybacks and carryforwards assuming Jenny Spangler 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.) (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation Debit Credit 2011

(To record income tax expense.)

2012 - 2 ENTRIES

(To record carryforward.)2013

(TO RECORD CARRYBACK) 2013

2014 ENTRIES

2015 ENTRIES

Explanation / Answer

INCOME TAX EXPENSES FOR YEAR 2011

TAXABLE INCOME * 35%

= $88900 * 35%

= $31115

INCOME TAX EXPENSES A/C............................DR $31115

   TO INCOME TAX PAYBLE A/C $31115

----------------------------------------------------------------------------------------------------------------------------------------

INCOME TAX EXPENSES FOR YEAR 2012

INCOME TAX REFUND RECEIVABLE

= $177500 * 40%

= $71000

INCOME TAX REFUND RECEIVABLE A/C.........................DR $71000

TO BENIFIT DUE TO LOSS CARRYBACK $71000

-------------------------------------------------------------------------------------------------------------------------------------------------

INCOME TAX EXPENSES FOR YEAR 2013

BENIFIT DUE TO LOSS CARRYBACK (INCOME TAX EXPENSES)

= $88900 * 35%

= $31115

BENEFIT DUE TO LOSS CARRYFORWARD (INCOME TAX EXPENSES)

=[($395500 - $88900) * 35%]

= $107310

INCOME TAX REFUND RECEIVABLE A/C.........................DR $31115

   TO BENEFIT DUE TO LOSS CARRYBACK $31115

DEFERED TAX ASSET A/C.........................................DR $107310

   TO BENEFIT DUE TO LOSS CARRYFORWARD $107310

INCOME TAX EXPENSES FOR YEAR 2014

DEFFERED TAX ASSETS

= $131300 * 35%

= $45955

INCOME TAX EXPENSES A/C..............................DR $45955

   TO DEFERRED TAX ASSET $45955

INCOME TAX EXPENSES FOR YEAR 2015

DEFFERED TAX ASSETS

= $113700 * 35%

= $39795

INCOME TAX EXPENSES A/C..............................DR $39795

   TO DEFERRED TAX ASSET $39795

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.