Riley Inc. reports the following pre-tax incomes (losses) for both financial reporting purposes and tax purposes: The

Question:

Riley Inc. reports the following pre-tax incomes (losses) for both financial reporting purposes and tax purposes:

The tax rates listed were all enacted by the beginning of 2009. Riley reports under the PE GAAP future income taxes method.
Instructions
(a) Prepare the journal entries for each of the years 2009 to 2012 to record income taxes, assuming the tax loss is first carried back, and that at the end of 2011, the loss carryforward benefits are judged more likely than not to be realized in the future.
(b) Using the assumption as in (a), prepare the income tax section of the 2011 and 2012 income statements, beginning with the line €œIncome (loss) before income taxes.€
(c) Prepare the journal entries for 2011 and 2012, assuming that it is more likely than not that 25% of the carryforward benefits will not be realized. A valuation allowance is not used by this company.
(d) Using the assumption in (c), prepare the income tax section of the 2011 and 2012 income statements, beginning with the line €œIncome (loss) before income taxes.€

GAAP
Generally Accepted Accounting Principles (GAAP) is the accounting standard adopted by the U.S. Securities and Exchange Commission (SEC). While the SEC previously stated that it intends to move from U.S. GAAP to the International Financial Reporting Standards (IFRS), the...