Question

Exercise 19-24 (Part Level Submission) Kingbird Inc. reports the following pretax income (loss) for both book and tax purposes. (Assume the carryback provision is used where possible for a net operating loss.) Year Pretax Income (Loss) Tax Rate 2015 $113,000 40 % 2016 97,000 40 % 2017 (308,000 ) 45 % 2018 117,000 45 % The tax rates listed were all enacted by the beginning of 2015.

(a) Prepare the journal entries for years 2015–2018 to record income tax expense (benefit) and 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-half 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. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit 2015 2016 2017 (To record refund.) (To record allowance.) 2018 (To record income taxes.) (To adjust allowance.)

Answer 1

Solution Date Account and explanation Debit Credit 2015 45200 Income tax expense L113000' X 40%) Income tax payable 45200 2016 38800 Income tax expense [97000 X 40% ] Income Tax payable 38800 2017 84000 44100 Income Tax refund Receivable [15200 +38800] Deferred Tax asset L 98000 X 454] Benefit due to loss carry Back Berefet due to loss carry forward 84000 44100 22050 22050 Benefit due to loss cary forward Allowance to reduce deforred tax Asset to expected realizable value [ 44100 x 112] 52650 2018 Income Tax expense [ 117000X454] Income Tax payable (52650 - 441002 Deferred Tax asset 8550 44100 22050 Allowance to reduce deferred tax asset to expected Realizable value Berefit due to loss carry forward 29050