Nielson AG reports the following pretax income (loss) for both book and tax purposes.

The tax rates listed were all enacted by the beginning of 2020.

Instructions

a. Prepare the journal entries for years 2020–2023 to record income tax expense (benefit) and income taxes payable (refundable) and the tax effects of the loss carryforward, assuming that based on the weight of available evidence it is probable that one-half of the benefits of the loss carryforward will not be realized.

b. Prepare the income tax section of the 2022 income statement, beginning with the line “Operating loss before income taxes.”

c. Prepare the income tax section of the 2023 income statement, beginning with the line “Income before income taxes.”

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Year Pretax Income (Loss) Tax Rate 2020 €120,000 40% 2021 90,000 40% 2022 (280,000) 45% 2023 120,000 45%