CPF Corporation reported the following results for its first three years of operation:
Description Amount
2013 Income (before income taxes)………………. $ 80,000
2014 Loss (before income taxes)………………..…. (620,000)
2015 Income ( before income taxes) ………………. 800,000
There were no permanent or temporary differences during these three years. Assume a corporate tax rate of 46% for 2013, 40% for 2014, and 34% for 2015. CPF elects to use the carry back- carry forward provision. All tax rates were enacted at the beginning of the year. All tax rate changes are not known until the year of change.
Required
a. What income (loss) should CPF report in 2014? (Assume that any deferred tax asset recognized is more likely than not to be realized.)
b. Prepare the journal entry or entries to record the tax provision for 2014. c. Prepare the journal entry or entries to record the tax provision for 2015.
d. Independent of your answer to part (a), assume now that CPF elects to use the carry forward- only provision and not the carry back provision. What income (loss) does CPF report in 2014?
e. Using the assumptions made in part (d), prepare the journal entry entries for 2014.
f. Using the assumptions made in part (d), prepare the journal entry entries for 2015.