Benata Ltd. started operations in 20X5 and purchased buildings and equipment with an original cost of $400,000. Benata reported the following information:

	20X5	20X6	20X7	20X8
Accounting earnings before tax	$150,000	$230,000	$310,000	$(460,000)
Golf club dues	15,000	15,000	20,000	15,000
Depreciation expense	45,000	45,000	45,000	45,000
CCA claimed	55,000	92,500	70,000	—
Warranty expense	25,000	41,000	57,000	29,000
Warranty costs incurred	22,000	32,000	55,000	23,000
Tax rate—enacted in each year	35%	37%	40%	40%

Required:

1. Prepare the journal entries for income taxes for each of the four years. Assume that the company is concerned that it might have another significant loss in 20X9.

2. Prepare the journal entries for income taxes for each of the four years, assuming that the company wants to maximize the amount it can recover from the tax carryback, it sees the loss in 20X8 as an isolated incident, and it anticipates large profits in the next few years.

3. Repeat requirements 1 and 2, assuming that the taxable loss in 20X8 was $950,000.

Answer rating: 100% (QA)

Quiz a The following journal entries for income taxes would be recorded for each of the four years 2... View the full answer