Refer to the information in Problem 19-10 and modify it as follows: The company decided to carry back its 2007 operating loss. Furthermore, since the company had already begun to develop the new product at the end of 2007 and had contracts for its sale in 2008, the company was confident at the end of 2007 that it would earn sufficient taxable income in the future carryforward period.
Required
1. Prepare the income tax journal entries of the Ross Company at the end of 2007.
2. Prepare the Ross Company’s 2007 income statement. Include a note for any operating loss carryforward recognition.
3. Prepare the journal entry to record the receipt of the refund check on June 1, 2008.
4. Prepare the income tax journal entry at the end of 2008.
5. Prepare the Ross Company’s 2008 income statement.