Question

Indigo Inc. reported the following pretax income (loss) and related tax rates during the years 2013–2019. Pretax Income (loss) Tax Rate 2013 $38,500 30 % 2014 27,400 30 % 2015 45,100 30 % 2016 78,500 40 % 2017 (196,400 ) 45 % 2018 79,600 40 % 2019 96,200 35 % Pretax financial income (loss) and taxable income (loss) were the same for all years since Indigo began business. The tax rates from 2016–2019 were enacted in 2016.

(a) 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 Indigo 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. (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.) Date Account Titles and Explanation Debit Credit 2017 (To record carryback.) (To record carryforward.) 2018 2019 Click if you would like to Show Work for this question: Open Show Work SHOW LIST OF ACCOUNTS LINK TO TEXT

Answer 1

Date	Account Titles and Explanation	Debit	Credit
2017	Income tax refund receivable [(45100*30/100)+(78500*40/100)]	44930
	benefits due to loss carryback		44930
	(To record carryback.)
	Deferred tax asset [(196400 - 78500 - 45100 ) *40/100]	29120
	benefits due to loss carry forward		29120
	(To record carryforward.)
2018	Income Tax Expense [79600*40/100]	31840
	Deferred Tax Asset		29120
	Income Tax Payable		2720
2019	Income Tax Expense[96200*35/100]	33670
	Income Tax Payable		33670