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The pretax financial income (or loss) figures for Vaughn Company are as follows. 2012 $160,000 2013...

The pretax financial income (or loss) figures for Vaughn Company are as follows. 2012 $160,000 2013 259,000 2014 86,000 2015 (160,000 ) 2016 (400,000 ) 2017 114,000 2018 102,000 Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 45% tax rate for 2012 and 2013 and a 40% tax rate for the remaining years. Prepare the journal entries for the years 2014 to 2018 to record income tax expense and the effects of the net operating loss carrybacks and carryforwards assuming Vaughn 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.)

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ANSWER: Debit Credit (S) Year Accounts titles and Explanation 2014 Income Tax Expense 2015 Income Tax Refund Receivable ($160,000 * 4596) 34,400 Income Taxes Payable ($86,000 * 40%) Benefit Due to NOL Carry back (Income Tax Expense) Benefit Due to NOL Carry back (Income Tax Expense) Benefit Due to NOL Carry forward (Income Tax Expense) Deferred Tax Asset (40% * $120,000) 34,400 72,000 72,000 2016 Income Tax Refund Receivable ($86,000 * 40%) 34,400 34,400 2016 Deferred Tax Asset [40% * ($400,000- $86,000)] 125,600 125.600 2017 Income Tax Expense 45,600 45,600 2018 Income Tax Expense 40,800 Deferred Tax Asset (40% * $102,000) 40.800

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