The pretax financial income (or loss) figures for Jenny Spangler Company are as follows.
2003 ......$160,000
2004 ........250,000
2005 .......80,000
2006 ...... (160,000)
2007 ...... (380,000)
2008 ........120,000
2009 ........100,000
Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 45% tax rate for 2003 and 2004 and a 40% tax rate for the remaining years.
Instructions
Prepare the journal entries for the years 2005 to 2009 to record income tax expense and the effects of the net operating loss carrybacks and carryforwards assuming Jenny Spangler Company uses the carryback provision. All income and losses relate to normal operations. (In recording the benefits of a loss carryforward, assume that no valuation account is deemed necessary.)