(Carryback and Carryforward of NOL, No Valuation Account, No Temporary Differences) The pretax financial income (or loss) figures for Jenny Spangler Company are as follows.
2002 $160,000
2003 250,000
2004 80,000
2005 (160,000)
2006 (380,000)
2007 120,000
2008 100,000
Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 45% tax rate for 2002 and 2003 and a 40% tax rate for the remaining years.
Instructions:
Prepare the journal entries for the years 2004 to 2008 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.)