Question

Ayayai Corporation has pretax financial income (or loss) equal to taxable income (or loss) from 2009 through 2017 as follows: Income (Loss) Tax Rate 2009 $30,740 30 % 2010 42,400 30 % 2011 18,020 35 % 2012 50,880 50 % 2013 (159,000 ) 40 % 2014 95,400 40 % 2015 31,800 40 % 2016 111,300 40 % 2017 (63,600 ) 45 % Pretax financial income (loss) and taxable income (loss) were the same for all years since Ayayai has been in business. Assume the carryback provision is employed for net operating losses. In recording the benefits of a loss carryforward, assume that it is more likely than not that the related benefits will be realized. What entries for income taxes should be recorded for 2013? (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.) Account Titles and Explanation Debit Credit (To record carryback.) (To record carryforward.) LINK TO TEXT Indicate what the income tax expense portion of the income statement for 2013 should look like. Assume all income (loss) relates to continuing operations. (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Ayayai Corporation Income Statement (Partial) $ $ $ LINK TO TEXT What entry for income taxes should be recorded in 2014? (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.) Account Titles and Explanation Debit Credit LINK TO TEXT How should the income tax expense section of the income statement for 2014 appear? (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Ayayai Corporation Income Statement (Partial) $ $ $ LINK TO TEXT What entry for income taxes should be recorded in 2017? (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.) Account Titles and Explanation Debit Credit LINK TO TEXT How should the income tax expense section of the income statement for 2017 appear? (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Ayayai Corporation Income Statement (Partial) $ $

Answer 1

No.	Accounts Title and explanation	Dr($)	Cr($)
(a)	Income Tax Refund Receivable	31,747
	[($18,020 X 35%) + ($50,880 X 50%)]
	Benefit Due to Loss Carryback		31,747
	(Being loss carry back applied 2 years)
	Deferred Tax Asset	36,040
	Benefit Due to Loss Carryforward		36,040
	($159,000 – $18,020 – $50,880 = $90,100)
	($90,100 X 40% = $36,040)
	(Being deferred tax assets recorded)
(b)	Operating loss before income taxes		($159,000)
	Income tax benefit
	Benefit due to loss carryback	$31,747
	Benefit due to loss carryforward	36,040	67,787
	Net loss		($91,213)
(c)	Income Tax Expense	38,160
	Deferred Tax Asset		36,040
	Income Taxes Payable		2,120
	[40% X ($95,400 – $90,100)]
	(Being income tax expense for 2014 recorded)
(d)	Income before income taxes		$95,400
	Income tax expense
	Current	$2,120
	Deferred	36,040	38,160
	Net income		$57,240
(e)	Income Tax Refund Receivable	25,440
	[($31,800 X 40%) + ($31,800 X 40%)]
	Benefit Due to Loss Carryback		25,440
	(Being loss carry back applied 2 years)
(f)	Operating loss before income taxes		($63,600)
	Income tax benefit
	Benefit due to loss carryback		25,440
	Net loss		($38,160)