Wexley reported the following pretax financial income (loss) for the years 2015–

Question

Wexley reported the following pretax financial income (loss) for the years 2015–2019.

2015    $340,000

2016      380,000

2017      110,000

2018    (730,000)

2019    200,000

Pretax financial income (loss) and taxable income (loss) were the same for all years involved. The enacted tax rate was 40% for all years. Assume the carryback provision is used first for net operating losses.

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 at the end of 2018 the benefits of the loss carryforward are judged more likely than not to be realized in the future.

Please Explain your steps!

Explanation / Answer

Entry:

Particulars Amount Tax amount Loss 2018 730,000 292000 Loss carryback 2017 110,000 44000 Loss carryback 2016 380,000 152000 Loss carry forwad 240,000 96000 Loss set off in 2019 200,000 80000 Loss carry forwad 40,000 16000

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