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

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Riley Inc. reports the following pre-tax incomes (losses) for both financial reporting purposes and tax purposes:
Year Accounting Income (Loss) Tax Rate
2012............................$ 120,000....................34%
2013................................90,000....................34%
2014.............................(280,000)...................38%
2015..............................220,000...................38%
The tax rates listed were all enacted by the beginning of 2012. Riley reports under the ASPE future/deferred income taxes method.
Instructions
(a) Prepare the journal entries for each of the years 2012 to 2015 to record income tax, assuming the tax loss is first carried back, and that at the end of 2014, the loss carry forward benefits are judged more likely than not to be realized in the future.
(b) Using the assumption as in part (a), prepare the income tax section of the 2014 and 2015 income statements, beginning with the line "Income (loss) before income tax."
(c) Prepare the journal entries for 2014 and 2015, assuming that it is more likely than not that 25% of the carry forward benefits will not be realized. This company does not use a valuation allowance.
(d) Using the assumption in part (c), prepare the income tax section of the 2014 and 2015 income statements, beginning with the line "Income (loss) before income tax."
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Related Book For  book-img-for-question

Intermediate Accounting

ISBN: 978-1118300855

10th Canadian Edition Volume 2

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy

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