Practice Exercise 19-5 Sage Co. reported the following pretax financialincome (l

Question

Practice Exercise 19-5 Sage Co. reported the following pretax financialincome (loss) for the years 2015-2019 2015 $340,000 2016 410,000 2017 214,000 2018 (679,000) 2019 260,000 nvolved. 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. 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 (Credit account titles are automatically indented when amount is entered. Do not indent manually, Itf no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit 2018 To record deferred tax asset/liability)

Explanation / Answer

Calculation of income tax payable: Year Income Previous years loss adjusted @ 1/5 Net income Tax Rate Income tax payable (a)    (b) (c ) = (a) - (b) (d) (e ) = (c )* (d) 2015 $3,40,000 $ -   $3,40,000 34% $1,15,600 2016 $4,10,000 $ -   $4,10,000 34% $1,39,400 2017 $2,14,000 $ -   $2,14,000 40% $85,600 2018 $-6,79,000 $ -   $ -6,79,000 0% $ -   2019 $2,60,000 $    -1,35,800 $1,24,200 40% $49,680 Date Account Title & explanations Debit Credit 2017 Profit & Loss $             85,600 Income Tax Liability $ 85,600 Income Tax Liability $             85,600 Bank $ 85,600 2018 No entry 2019 Profit & Loss $             49,680 Income Tax Liability $ 49,680 Income Tax Liability $             49,680 Bank $ 49,680 Income Statement of 2018: Year Income Previous years loss adjusted @ 1/5 Net income Tax Rate Income tax payable (a) (b) (c ) = (a) - (b) (d) (e ) = (c )* (d) 2018 $-6,79,000 $    -   $ -6,79,000 0% $ -   2019 $2,60,000 $ -1,35,800 $ 1,24,200 40% $ 49,680

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

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