Question

Buffalo reported the following pretax financial income (loss) for the years 2015-2019. 2015 2016 2017 2018 2019 $248,000 379,000 96,000 (535,000) 186,000 Pretax financial income (loss) and taxable income (loss) were the same for all years involved. The enacted tax rate was 34% for 2015 and 2016, and 40% for 2017-2019. Assume the carryback provision is used first for net operating losses. Your answer is partially correct. Try again. Prepare the journal entries for the years 2017-2019 to record income tax expense, 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-fifth 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 0 for the amounts.)

Answer 1

Answer a.
Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
2017	Income Tax Expense	38,400.00		$96,000 X 40%
	Income Tax Payable		38,400.00	$96,000 X 40%
	(to record the income tax expense)
2018	Income Tax Refund Receivable	167,260.00		($96,000 X 40%) + ($379,000 X 34%)
	Deferred Tax Asset	24,000.00		$60,000 X 40%
	Benefit due to Loss Carryback		167,260.00
	Benefit due to Loss Carryforward		24,000.00
	(To record refund)
2018	Benefit Due to Loss Carryforward	4,800.00		$24,000 x 1/5
	Allowance to Reduce Deferred Tax Asset to Expected Realizable Value		4,800.00
	(To record Allowance)
2019	Income Tax Expense	74,400.00		$186,000 X 40%
	Income Tax Payable		50,400.00	($186,000 - $60,000) x 40%
	Deferred Tax Asset		24,000.00
	(To record income taxes)
2019	Allowance to Reduce Deferred Tax Asset to Expected Realizable Value	4,800.00
	Benefit Due to Loss Carryforward		4,800.00
	(to adjust allowance)
Answer b.
	Income Statement (Partial)
	For the Year Ended Dec 31, 2018
	Income (Loss) before Income Tax		(535,000.00)
	Income Tax Benefit
	Benefit Due to Loss Carryback	167,260.00
	Benefit Due to Loss Carryforward	19,200.00	186,460.00
	Net Income (Loss)		(348,540.00)