The accounting income (loss) figures for Farah Corporation are as follows:
2006 ...........$ 160,000
2007 ........... 250,000
2008 ........... 80,000
2009 ........... (160,000)
2010 ........... (380,000)
2011 ........... 130,000
2012 ........... 145,000
Accounting income (loss) and taxable income (loss) were the same for all years involved. Assume a 42% tax rate for 2006 and 2007, and a 38% tax rate for the remaining years.
Instructions
Prepare the journal entries for each of the years 2008 to 2012 to record income tax expense and the effects of the tax loss carrybacks and carryforwards, assuming Farah Corporation uses the carryback provision first. All income and losses relate to normal operations and it is more likely than not that the company will generate substantial taxable income in the future.