E19-9 - recording the benefits of a loss carryforward,...

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E19-9 (LO 8) (Carryback and Carryforward of NOL, No Valuation Account, No Temporary Differences) The pretax financial income (or loss) figures for Jenny Spangler Company are as follows. 2002 2003 2004 2005 2006 2007 2008 160,000 250,000 80,000 -160,000 -380,000 120,000 100,000 Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 45% tax rate for 2002 and 2003 and a 40% tax rate for the remaining years. Instructions Prepare the journal entries for the years 2004 to 2008 to record income tax expense and the effects of the net operating loss carrybacks and carryforwards assuming Jenny Spangler Company uses the carryback provision. All income and losses relate to normal operations. (In
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Unformatted text preview: recording the benefits of a loss carryforward, assume that no valuation account is deemed necessary.) SOLUTIONS 2004 Income Tax Expense 32,000 Income Tax Payable ($80,000X40%) 32,000 2005 Income Tax Refund Receivable 72,000 ($160,000 X 45%) Benefit Due to Loss Carryback (Income Tax Expense) 72,000 2006 Income Tax Refund Receivable 32,000 Benefit Due to Loss Carryback (Income Tax Expense) 32,000 ($80,000X40%) Deferred Tax Asset 120,000 Benefit Due to Loss Carryforward (Income Tax Expense) 120,000 [40% X ($380,000 - $80,000)] 2007 Income Tax Expense 48,000 Deferred Tax Asset 48,000 (40% X $120,000) 2008 Income Tax Expense 40,000 Deferred Tax Asset 40,000 ($100,000 X 40%)...
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E19-9 - recording the benefits of a loss carryforward,...

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