Riley Inc. reports the following pre-tax incomes (losses) for both financial reporting purposes and tax purposes: The
Question:
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The tax rates listed were all enacted by the beginning of 2015. Riley reports under the ASPE future/deferred income taxes method.
Instructions
(a) Prepare the journal entries for each of the years 2015 to 2018 to record income tax. Assume the tax loss is first carried back and that at the end of 2017, the loss carryforward benefits are judged more likely than not to be realized in the future.
(b) Using the assumptions in part (a), prepare the income tax section of the 2017 and 2018 income statements, beginning with the line "Income (loss) before income tax."
(c) Prepare the journal entries for 2017 and 2018. Assume that it is more likely than not that one quarter of the carry- forward benefits will not be realized. This company does not use a valuation allowance.
(d) Using the assumptions in part (c), prepare the income tax section of the 2017 and 2018 income statements, beginning with the line "Income (loss) before income tax."
(e) Using the assumptions in part (c), discuss what information should be disclosed in the notes to the financial statements.
Step by Step Answer:
a 2015 Current Tax Expense 30000 Income Tax Payable 120000 X 25 30000 2016 Current Tax Expense 22500 ...View the full answer
Intermediate Accounting
ISBN: 978-1119048541
11th Canadian edition Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy
