Question

Whispering 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 Tax Rate 40 % Pretax Income (Loss) $114,000 91,000 (300,000) 125,000 2015 2016 2017 2018 40% 45 % 45 % The tax rates listed were all enacted by the beginning of 2015. 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 o for the amounts.) Debit Credit Date Account Titles and Explanation 2015 2016 2017

Answer 1

Datel eredit] $45,600 $36,400 Answer: a) Journal particulars RF Debit 2015 Income tax expenses Ale or $45600 To Tace payable $14.000 x 401] Being to record. Income tax expouse for the period 2016 Income tax expense ale [ 91000x1067 px $36,400 TO Income tax payable Being to record Income tax expense for the period 2017 Income tax refund receivable ale or $82,000 [45,600 +$36.400] De ferred tax asset ale or $95,000 [$300,000 - $114,000-$91,000] TO Benefit due to Loss Carry TO Benefit due to loss carry no back, forward. Being to record sefard] /2017 Benefit due to loss Carry forward Alor $47,500 {$95000x501] To Allowance to sedelce ptato expected receivable value. Being to record Allowance] 2018 Income tax expenses Ale $ 108,500 - To Deferred tax asset To Income tax payable. 125000-44300,000 €114.000+$91,000)]2457 Being To record Income tax expense? 2018 Allow auce to reduce PTA to expected Ale pr $47,500 Receivable value To Benefit due to coas carrytoward Being to record allowance $82,000 $95.000 $47,500 Dr! $95.000 $13,500 |$47,500

Amount *300,000 $82,000 $147,500 $ 170,500 b) Income statement for the year 2017 particulars o peraling Coss before Income Loss Less! Income tax benefits Benefit due to loss carry back Benefit due to loss Corry forward Net Operatiug Cors a) Tucome stateme for the year 2018- particulars amount Income before Income tears Less! Income tax expenses $13,500 Current $95.000 Deferred Benefit due to Cous Casoy forward $47,500) Net Income Amount $ 125,000 $61,000 $ 64,000