Hayes Co. reported the following pretax financial income (loss) for the years 2020–2024.

2020 ............... $240,000
2021 ................. 350,000
2022 ................. 120,000
2023 ............... (570,000)
2024 ................ 180,000

Pretax financial income (loss) and taxable income (loss) were the same for all years involved. The enacted tax rate was 34% for 2020 and 2021, and 40% for 2022–2024. Assume the carryback provision is used first for net operating losses.

Instructions

a. Prepare the journal entries for the years 2022–2024 to record income tax expense, income taxes payable (refundable), and the tax effects of the loss carryback and loss carryforward, assuming that based on the weight of available evidence it is probable that all of the benefits of the loss carry-forward will be realized.

b. Prepare the income tax section of the 2023 income statement, beginning with the line “Income (loss) before income taxes.”