At the end of 2016 its first year of operations
At the end of 2016, its first year of operations, Swelland Company reported a pretax operating loss of $ 32,000 for both financial reporting and income tax purposes. At that time, Swelland had no positive verifiable evidence that it would earn future taxable income. However, due to successful management, the company reported pretax operating income (and taxable income) of $ 70,000 in 2017. During both years, the income tax rate was 30%, and no change had been enacted for future years.
Required:
1. Prepare Swelland’s income tax journal entries at the end of 2016.
2. Prepare Swelland’s income tax journal entry at the end of 2017.
3. Prepare the lower portion of Swelland’s 2017 income statement.
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