The accounting income (loss) figures for Farah Corporation are as follows:
2012 ............................ $ 160,000
2013 .............................. 250,000
2014 ................................ 80,000
2015 ............................ (160,000)
2016 ............................. (380,000)
2017 .............................. 130,000
2018 .............................. 145,000
Accounting income (loss) and taxable income (loss) were the same for all years involved. Assume a 30% tax rate for 2012 and 2013, and a 25% tax rate for the remaining years.
Instructions
Prepare the journal entries for each of the years 2014 to 2018 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.