For both financial reporting purposes and tax purposes. (Assume the carryback provision is used for a net operating loss.)

The tax rates listed were all enacted by the beginning of 2017.

Instructions

a. Prepare the journal entries for the years 2017-2020 to record income tax expense (benefit) and income taxes payable (refundable) and the tax effects of the loss carryback and carryforward, assuming that at the end of 2019 it is probable that the benefits of the loss carryforward will be realized in the future.

b. Using the assumption in (a), prepare the income tax section of the 2019 income statement, beginning with the line "Operating loss before income taxes."

c. Prepare the journal entries for 2019 and 2020, assuming that based on the weight of available evidence at 12/31/19, it is probable that one-fourth of the benefits of the loss carryforward will not be realized.

d. Using the assumption in (c), prepare the income tax section of the 2019 income statement, beginning with the line "Operating loss before income taxes."