DiVito Imported Provisions, Inc. reported pretax accounting income equal to its taxable income, as presented below:

All tax changes are enacted into law as of the beginning of the year. All tax rate changes are not known until the year of change. DiVito elects the carryback/ carryforward option for all net operating losses. For the losses noted above, management concluded that it is more likely than not that the benefits of the net operating losses will be fully realizable in the future.

Required
a. Prepare the journal entries necessary to record the tax provisions for years 4 through 8.
b. Prepare a partial income statement for years 4 through 8.
c. Compute the effective tax rate for years 4 through 8.

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Income (Loss) Before Tax S 60,000 82,000 58,000 300,000 50,000 45,000 80,000 (250,000) 20,000 30,000 Year Tax Rate 35% 40% 40% 40% 35% 35% 35% 40% 38% 38% 5 10