Question

Question 8 Skysong Corporation has pretax financial income (or loss) equal to taxable income (or loss) from 2009 through 2017 as follows: Income (Loss) Tax Rate 2009 $34,800 30 % 2010 48,000 30 % 2011 20,400 35% 57,600 50% 2013 (180,000) 40 % 2014 100,000 40 % 2015 36,000 2016 126,000 40 2017 (72,000) 2012 40 Pretax financial income (loss) and taxable income (loss) were the same for all years since Skysong 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 Ikely than not that the related benefits will be realized.

Answer 1

Part A

Account Titles and Explanation	Debit	Credit
Income Tax Refund Receivable	35940
Benefit Due to Loss Carryback ((57600*50%)+(20400*35%))		35940
(To record carryback.)
Deferred Tax Asset	40800
Benefit Due to Loss Carryforward (180000-57600-20400)*40%		40800
(To record carryforward.)

Part B

Skysong Corporation

Income Statement (Partial)

Year ended December 31, 2013

Operating Loss before Income Taxes		180000
Income Tax Benefit
Benefit Due to Loss Carryback	35940
Benefit Due to Loss Carryforward	40800
		76740
Net Income / (Loss)		103260

Part C

Account Titles and Explanation	Debit	Credit
Income Tax Expense (40%*108000)	43200
Deferred Tax Asset		40800
Income Tax Payable (40%*(108000-(180000-57600-20400)))		2400

Part D

Skysong Corporation

Income Statement (Partial)

Year ended December 31, 2014

Income before Income Taxes		108000
Income Tax Expense - Current	2400
Income Tax Expense - Deferred	40800
		43200
Net Income / (Loss)		64800

Part E

Account Titles and Explanation	Debit	Credit
Income Tax Refund Receivable (36000*40%)+(36000*40%)	28800
Benefit Due to Loss Carryback		28800

Part F

Skysong Corporation

Income Statement (Partial)

Year ended December 31, 2017

Operating Loss before Income Taxes	(72000)
Income Tax Benefit Due to Loss Carryback	28800
Net Income / (Loss)	(43200)