Hayes Co. reported the following pretax financial income (loss) for the years 20132017. Pretax financial income (loss)

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Hayes Co. reported the following pretax financial income (loss) for the years 2013–2017.

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Pretax financial income (loss) and taxable income (loss) were the same for all years involved. The enacted tax rate was 34% for 2013 and 2014, and 40% for 2015–2017. Assume the carryback provision is used first for net operating losses.
Instructions

(a) Prepare the journal entries for the years 2015–2017 to record income tax expense, income taxes payable (refundable), and the tax effects of the loss carryback and loss carryforward, assuming that based on the weight of available evidence it is probable that one-fifth of the benefits of the loss carryforward will not be realized.

(b) Prepare the income tax section of the 2016 income statement, beginning with the line “Income (loss) before income taxes.”

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Intermediate Accounting IFRS Edition

ISBN: 9781118443965

2nd Edition

Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield

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