Spamela Hamderson Inc. reports the following pretax income (loss) for both financial reporting purposes and tax purposes. (Assume the carryback provision is used for a net operating loss.)

The tax rates listed were all enacted by the beginning of 2006.
Instructions
(a) Prepare the journal entries for the years 2006€“2009 to record income tax expense (benefit) and income tax payable (refundable) and the tax effects of the loss carryback and carryforward, assuming that at the end of 2008 the benefits of the loss carryforward are judged more likely than not to be realized in the future.
(b) Using the assumption in (a), prepare the income tax section of the 2008 income statement beginning with the line €œOperating loss before income taxes.€
(c) Prepare the journal entries for 2008 and 2009, assuming that based on the weight of available evidence, it is more likely than not that one-fourth of the benefits of the loss carryforward will not be realized.
(d) Using the assumption in (c), prepare the income tax section of the 2008 income statement beginning with the line €œOperating loss before incometaxes.€

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Year 2006 2007 2008 2009 Pretax Income (Loss) $120,000 90,000 (280,000) 220,000 Tax Rate 34% 34% 38% 38%