Question

Exercise 19-23 Pearl Inc. reports the following pretax income (loss) for both financial reporting purposes and tax purposes. Assume the carryback provision is used for a net operating loss.) Pretax Income (Loss) Year Tax Rate 2015 2016 2017 2018 $113,000 84,000 (270,000) 231,000 The tax rates listed were all enacted by the beginning of 2015. Prepare the journal entries for the years 2015-2018 to record income tax expense (benefit) and income taxes payable (refundable) and the tax effects of the loss carryback and carryforward, assuming that at the end of 2017 the benefits of the loss carryforward are judged more likely than not to be realized in the future. (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 o for the amounts.) Date Account Titles and Explanation Debit Credit 2015 Income Tax Expense Income Tax Payable 2016 Income Tax Expense Income Tax Payable 2017 Income Tax Refund Receivable Deferred Tax Asset Benefit Due to Loss Carryback Benefit Due to Loss Carryforward

Answer 1

Year	Particulars	Dr/Cr	Dr	Cr
2015	Income Tax Expense A/c	Dr	38,420
	To Income Tax Payable A/c	Cr		38,420
	(Being income tax expense charged)
2016	Income Tax Expense A/c	Dr	28,560
	To Income Tax Payable A/c	Cr		28,560
	(Being income tax expense charged)
2017	No entry as loss carryfoward are more likely not to be realised in future
2018	Income Tax Expense A/c	Dr	87,780
	To Income Tax Payable A/c	Cr		87,780
	(Being income tax expense charged)

Income Statement
December 31, 2017			Amount
Operating Loss before Income Taxes			(270,000)
Income Tax Benefit
Benefit due to loss carry back		-
Benefit due to loss carry forward		-
			-
Net Income/ (Loss)			(270,000)

Year	Particulars	Dr/Cr	Dr	Cr
2017	Income Tax Refund Receivable A/c	Dr	68,850
	To Benefit of loss carryforward A/c	Cr		68,850
	(Being income rax refundable recorded)
2018	Income Tax Expense A/c	Dr	78,540
	To Income Tax Payable A/c	Cr		78,540
	(Being income tax expense charged)
2018	Income Tax Payable A/c	Dr	68,850
	To Income Tax Refund Receivable A/c	Cr		68,850
	(Being income tax adjusted)

Income Statement
December 31, 2017			Amount
Operating Loss before Income Taxes			(270,000)
Income Tax Benefit
Benefit due to loss carryback		-
Benefit due to loss carryforward		68,850
			68,850
Net Income/ (Loss)			(201,150)