E19-23B SHOW CALCULATIONS (NOL Carryback and Carryforward, Valuation Account versus No Valuation Account) Public

Wares Corporation reports the following pretax income (loss) for both financial reporting purposes and

tax purposes. (Assume the carryback provision is used for a net operating loss and 2013 is the companys

first year of operations.)

Year Pretax Income (Loss) Tax Rate

2013 $230,000 40%

2014 (335,000) 40%

2015 (50,000) 35%

2016 265,000 30%

The tax rates listed were all enacted by the beginning of 2013.

Instructions PLEASE SHOW CALCULATIONS

(a) Prepare the journal entries for the years 2013 through 2016 to record income tax expense (benefit)

and income tax payable (refundable) and the tax effects of the loss carryback and carryforward,

assuming that the benefits of any loss carryforwards are judged more likely than not to be realized

in the future.

(b) Prepare the income tax section of the 2014 income statement beginning with the line Operating

loss before income taxes.

(c) Prepare the income tax section of the 2015 income statement beginning with the line Operating

loss before income taxes.