Meyer reported the following pretax financial income (loss) for the years 2012–2
ID: 2444985 • Letter: M
Question
Meyer reported the following pretax financial income (loss) for the years 2012–2016.
2012 $246,100
2013
358,000
2014 130,000
2015 (579,000 )
2016 176,200
Pretax financial income (loss) and taxable income (loss) were the same for all years involved. The enacted tax rate was 36% for 2012 and 2013, and 42% for 2014–2016. Assume the carryback provision is used first for net operating losses.
Prepare the journal entries for the years 2014–2016 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.)
Date
Account Titles and Explanation
Debit
Credit
2014
2015
(To record refund.)
(To record allowance.)
2016
(To record income taxes.)
(To adjust allowance.)
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Prepare the income tax section of the 2015 income statement beginning with the line “Income (loss) before income taxes.”. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Income Statement (Partial)
Year ended December 31, 2015
$
$
$
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Explanation / Answer
Answer:
Journal Entries to record income tax expenses:
2012 2013 2014 2015 2016 Pre tax 246100 358000 130000 -579000 176200 Tax rate 0.36 0.36 0.42 0.42 0.42 Tax amount 88596 128880 54600 0 74004 Post tax 157504 229120 75400 -579000 102196