1. (Carry back and Carry forward of NOL, No Valuation Account, No Temporary Differences) The pretax financial income (or loss) figures for Synergetic Company are as follows.
2006 $160,000
2007 250,000
2008 90,000
2009 (160,000)
2010 (350,000)
2011 120,000
2012 100,000
Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 45% tax rate for 2006 and 2007 and a 40% tax rate for the remaining years.
Prepare the journal entries for the years 2008 to 2012 to record income tax expense and the effects of the net operating loss carry backs and carry forwards assuming Synergetic Company uses the carry back provision. All income and losses relate to normal operations. (In recording the benefits of a loss carry forward, assume that no valuation account is deemed necessary.)