The pretax financial income or loss figures for Buffalo Comp

The pretax financial income (or loss) figures for Buffalo Company are as follows 2012 2013 2014 2015 2016 2017 2018 $176,000 234,000 82,000 (176,000) (407,000) 123,000 97,000 Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 45% tax rate for 2012 and 2013 and a 40% tax rate for the remaining years Prepare the journal entries for the years 2014 to 2018 to record income tax expense and the effects of the net operating loss carrybacks and carryforwards assuming Buffalo Company uses the carryback provision. All income and losses relate to normal operations. (In recording the benefits of a loss carryforward, assume that no valuation account is deemed necessary.) (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.)

Solution

Date General Journal Debit Credit 2014 Income Tax Expense 32800 Incomme Tax Payable 32800 82000*40% to record income tax expense 2015 Income Tax Refund Receivable 79200 Benefit Due to Loss Carryback 79200 176000*45% 2016 Income Tax Refund Receivable 32800 Benefit Due to Loss Carryback 32800 (To record carryback) 2016 Deferred Tax Asset 143200 Benefit Due to Loss Carryforward 143200 (To record carryforward) (176000-32800) 2017 Income Tax Expense 49200 Deferred Tax Asset 49200 123000*40% 2018 Income Tax Expense 38800 Deferred Tax Asset 38800 97000*40%