Exercise 19-24 (Part Level Submission) Flounder Inc. reports the following preta
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Question
Exercise 19-24 (Part Level Submission)
Flounder Inc. reports the following pretax income (loss) for both book and tax purposes. (Assume the carryback provision is used where possible for a net operating loss.)
Year
Pretax
Income (Loss)
Tax Rate
2015
$123,000
40
%
2016
98,000
40
%
2017
(289,000
)
45
%
2018
119,000
45
%
The tax rates listed were all enacted by the beginning of 2015.
(a)
Your answer is correct.
Prepare the journal entries for years 2015–2018 to record income tax expense (benefit) and 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-half 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.)
Date
Account Titles and Explanation
Debit
Credit
2015
2016
2017
(To record refund.)
(To record allowance.)
2018
(To record income taxes.)
(To adjust allowance.)
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Attempts: 1 of 3 used
(b)
Your answer is correct.
Prepare the income tax section of the 2017 income statement beginning with the line “Operating loss before income taxes.” (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Flounder Inc.
Income Statement (Partial)
December 31, 2017For the Year Ended December 31, 2017For the Quarter Ended December 31, 2017
DividendsExpensesBenefit Due to Loss CarrybackBenefit Due to Loss CarryforwardIncome Tax BenefitIncome Tax Expense - CurrentIncome Tax Expense - DeferredNet Income / (Loss)Operating Loss before Income TaxesRetained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
$
DividendsExpensesBenefit Due to Loss CarrybackBenefit Due to Loss CarryforwardIncome Tax BenefitIncome Tax Expense - CurrentIncome Tax Expense - DeferredNet Income / (Loss)Operating Loss before Income TaxesRetained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
Dividends Expenses Benefit Due to Loss Carryback Benefit Due to Loss Carryforward Income Tax Benefit Income Tax Expense - Current Income Tax Expense - Deferred Net Income / (Loss) Operating Loss before Income Taxes Retained Earnings, January 1 Retained Earnings, December 31 Revenues Total Expenses Total Revenues
$
Dividends Expenses Benefit Due to Loss Carryback Benefit Due to Loss Carryforward Income Tax Benefit Income Tax Expense - Current Income Tax Expense - Deferred Net Income / (Loss) Operating Loss before Income Taxes Retained Earnings, January 1 Retained Earnings, December 31 Revenues Total Expenses Total Revenues
DividendsExpensesBenefit Due to Loss CarrybackBenefit Due to Loss CarryforwardIncome Tax BenefitIncome Tax Expense - CurrentIncome Tax Expense - DeferredNet Income / (Loss)Operating Loss before Income TaxesRetained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
$
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Attempts: 2 of 3 used
(c)
Your answer is partially correct. Try again.
Prepare the income tax section of the 2018 income statement beginning with the line “Income before income taxes.” (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
Flounder Inc.
Income Statement (Partial)
December 31, 2018For the Year Ended December 31, 2018For the Quarter Ended December 31, 2018
CurrentDeferredDividendsExpensesIncome Tax Benefit Due to Loss CarrybackIncome Tax Benefit Due to Loss CarryforwardIncome Tax ExpenseNet Income / (Loss)Income before Income TaxesRetained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
$
CurrentDeferredDividendsExpensesIncome Tax Benefit Due to Loss CarrybackIncome Tax Benefit Due to Loss CarryforwardIncome Tax ExpenseNet Income / (Loss)Income before Income TaxesRetained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
Current Deferred Dividends Expenses Income Tax Benefit Due to Loss Carryback Income Tax Benefit Due to Loss Carryforward Income Tax Expense Net Income / (Loss) Income before Income Taxes Retained Earnings, January 1 Retained Earnings, December 31 Revenues Total Expenses Total Revenues
$
Current Deferred Dividends Expenses Income Tax Benefit Due to Loss Carryback Income Tax Benefit Due to Loss Carryforward Income Tax Expense Net Income / (Loss) Income before Income Taxes Retained Earnings, January 1 Retained Earnings, December 31 Revenues Total Expenses Total Revenues
Current Deferred Dividends Expenses Income Tax Benefit Due to Loss Carryback Income Tax Benefit Due to Loss Carryforward Income Tax Expense Net Income / (Loss) Income before Income Taxes Retained Earnings, January 1 Retained Earnings, December 31 Revenues Total Expenses Total Revenues
CurrentDeferredDividendsExpensesIncome Tax Benefit Due to Loss CarrybackIncome Tax Benefit Due to Loss CarryforwardIncome Tax ExpenseNet Income / (Loss)Income before Income TaxesRetained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
$
Exercise 19-24 (Part Level Submission)
Flounder Inc. reports the following pretax income (loss) for both book and tax purposes. (Assume the carryback provision is used where possible for a net operating loss.)
Year
Pretax
Income (Loss)
Tax Rate
2015
$123,000
40
%
2016
98,000
40
%
2017
(289,000
)
45
%
2018
119,000
45
%
The tax rates listed were all enacted by the beginning of 2015.
Explanation / Answer
FLOUNDER Inc. Year 2015 General , Journal Particular Amt(Dr) Amt(Cr) Income Tax Expense $ 49,200.00 To Income Tax Payable $ 49,200.00 Being amount of Income Tax Expense($123000*40%) Year 2016 Income Tax Expense $ 39,200.00 To Income Tax Payable $ 39,200.00 Being amount of Income Tax Expense($98000*40%) Year 2017 Income Tax Refund Receivable $ 88,400.00 Deferred Tax Assets $ 30,600.00 To Benefit due to loss carryback($123000*40%+98000*40%) $ 88,400.00 To Benefit due to loss Carryforward ($289000-$123000-$98000)*45% $ 30,600.00 (being amount od Income tax receivable and Deferred tax assets) Benefit due to loss carryforward($30600*50%) $ 15,300.00 To Allowance to reduce Deferred Tax Assets $ 15,300.00 (Being amount of 50% of Benefit due to loss carryforward) Year 2018 Income Tax Expense $ 53,550.00 To Deferred Tax Assets $ 30,600.00 To Income Tax Payable $ 22,950.00 (Being amount of Income Tax Expense) Allowance to reduce deferred tax assets to expected realizable value $ 15,300.00 To Benefit due to loss carryforward $ 15,300.00 (Being amount of Allowance to reduce deferred tax assets) (b) Operating Loss before Income Taxes $ -2,89,000.00 Income Tax Benefit Benefit due to loss carryback $ 88,400.00 Benefit due to loss carryforward($30600-$15300) $ 15,300.00 $ 1,03,700.00 Net Loss $ -1,85,300.00 c ) Income before Income Taxes $ 1,19,000.00 Less:Income tax Expense Current Income tax $ 22,950.00 Deferred Tax $ 30,600.00 Benefit due to loss carryforward $ -15,300.00 $ 38,250.00 Net Income $ 80,750.00
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