Meyer reported the following pretax financial income (loss) for the years 2012–2016.\n2012 $240,000\n2013 350,000\n2014 120,000\n2015 (570,000)\n2016 180,0
Meyer reported the following pretax financial income (loss) for the years 2012–2016.
\r\n2012 $240,000
\r\n2013 350,000
\r\n2014 120,000
\r\n2015 (570,000)
\r\n2016 180,000
\r\nPretax financial income (loss) and taxable income (loss) were the same for all years involved. The enacted tax rate was 34% for 2012 and 2013, and 40% for 2014–2016. Assume the carryback provision is used first for net operating losses.
\r\nInstructions
\r\n(a) 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.
\r\n(b) Prepare the income tax section of the 2015 income statement beginning with the line “Income (loss) before income taxes.”