(NOL without Valuation Account) Parnevik Inc. reported the following pretax income (loss)
5 8, and related tax rates during the years 2002-2008.

Pretax financial income (loss) and taxable income (loss) were the same for all years since Parnevik began business. The tax rates from 2005-2008 were enacted in 2005.
Instructions

(a) Prepare the journal entries for the years 2006-2008 to record income tax payable (refundable), income tax expense (benefit), and the tax effects of the loss carryback and carryforward. Assume that Parnevik elects the carryback provision where possible and expects to realize the benefits of any loss carryforward in the year that immediately follows the loss year.

(b) Indicate the effect the 2006 entry(ies) has on the December 31, 2006, balance sheet.

(c) Prepare the portion of the income statement, starting with “Operating loss before income taxes,”
for 2006.

(d) Prepare the portion of the income statement, starting with “Income before income taxes,” for 2007.

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Pretax Income (loss) Tax Rate 2002 $ 40,000 30% 2003 25,000 30% 2004 60,000 30% 2005 80,000 40% 2006 (200,000) 45% 2007 70,000 40% 2008 90,000 35%