Question: At the end of 2010, Nelson Inc. reports a pretax operating loss of $80,000 for both financial reporting and income tax purposes. Prior to 2010 the company had reported and paid taxes on the following pretax financial income: 2007, $37000; 2008, $50000; 2009, $54000. The company had been subject to tax rates of 20% for 2007, 25% for 2008, and 30% for 2009.
Please help me and explain how to prepare the income tax journal entry for the end of 2010 and prepare the lower portion of the 2010 Income statement.
1)
Income tax refund receivable
Income tax benefit from operating loss carryback
2)
Pretax Operating Loss
Less: Income tax benetfit from operating loss carryback
Net Loss