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Teal Inc. reported the following pretax income (loss) and related tax rates during the years 2013–2019....

Teal Inc. reported the following pretax income (loss) and related tax rates during the years 2013–2019. Pretax Income (loss) Tax Rate 2013 $38,600 30 % 2014 23,900 30 % 2015 48,900 30 % 2016 73,600 40 % 2017 (196,900 ) 45 % 2018 74,800 40 % 2019 98,500 35 % Pretax financial income (loss) and taxable income (loss) were the same for all years since Teal began business. The tax rates from 2016–2019 were enacted in 2016. Prepare the journal entries for the years 2017–2019 to record income taxes payable (refundable), income tax expense (benefit), and the tax effects of the loss carryback and carryforward. Assume that Teal elects the carryback provision where possible and expects to realize the benefits of any loss carryforward in the year that immediately follows the loss year.

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158 Journal entries 7159 Date Account titles and explanation Income Tax Refund Receivable 2015 548,900 x 30%) Income Tax Refund Receivable 2016 Debit Credit 2017 14670 7160 29440 7161 7162 7163 Benefit Due to Loss Carryback 44110 Deferred Tax Asset [(5196900- $73600) x 40%) = (74400.40%) Benefit Due to Loss Carryforward 2017 29760 7164 7165 7166 7167 7168 29760 2018 Income lTax Expense 29920 Deferred Tax Asset Income Tax Payable [($74800-74400) x 40% 29760 160 7169 7170 2019 Income lTax Expense 34475 7172 7173 7174 7175 2017 Income statement 7176 Income Tax Payable ($98500 x 35%) 34475 Operating loss before income taxes Income tax benefit Benefit due to loss carryback Benefit due to loss carryforward Net loss 196900 44110 29760 7178 7179 7180 7181 2018 income statement 7182 7183 7184 7185 73870 123030 Income before income taxes Income tax expense Current Deferred Net income 74800 160 29760 29920 44880

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