Exercise 18-26

Blue Spruce Inc. reports the following pre-tax incomes (losses) for both financial reporting purposes and tax purposes:

		Accounting
		Income
Year		(Loss)			Tax Rate
2018		$122,000			25	%
2019		99,000			25	%
2020		(300,000	)		30	%
2021		225,000			30	%

The tax rates listed were all enacted by the beginning of 2018. Blue Spruce reports under the ASPE future/deferred income taxes method.

Prepare the journal entries for each of the years 2018 to 2021 to record income tax. Assume the tax loss is first carried back, and that at the end of 2020, the loss carryforward benefits are judged more likely than not to be realized in the future. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Date

Account Titles and Explanation

Debit

Credit

2018

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

2019

enter an account title

enter a debit amount

enter a credit amount

enter an account title

enter a debit amount

enter a credit amount

2020

enter an account title to record benefit from loss carryback

enter a debit amount

enter a credit amount

enter an account title to record benefit from loss carryback

enter a debit amount

enter a credit amount

(To record benefit from loss carryback)

enter an account title to record deferred benefit from loss carryforward

enter a debit amount

enter a credit amount

enter an account title to record deferred benefit from loss carryforward

enter a debit amount

enter a credit amount

(To record deferred benefit from loss carryforward)

2021

enter an account title to record current tax expense

enter a debit amount

enter a credit amount

enter an account title to record current tax expense

enter a debit amount

enter a credit amount

(To record current tax expense)

enter an account title to record deferred tax expense

enter a debit amount

enter a credit amount

enter an account title to record deferred tax expense

enter a debit amount

enter a credit amount

(To record deferred tax expense)

Assuming the tax loss is first carried back and that at the end of 2020, the loss carryforward benefits are judged more likely than not to be realized in the future, prepare the income tax section of the 2020 and 2021 income statements, beginning with the line Income (loss) before income tax. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Blue Spruce Inc. (Partial) Income Statement choose the accounting period December 31, 2020For the Month Ended December 31, 2020For the Year Ended December 31, 2020
select an income statement item Income / (Loss) Before Income TaxFuture Benefit due to Loss CarryforwardCurrent Benefit due to Loss CarrybackDeferred Tax AssetDeferred Tax LiabilityNet Income / (Loss)				$enter a dollar amount
select an income statement item Net Income / (Loss) Future Benefit due to Loss Carryforward Deferred Tax Asset Deferred Tax Liability Current Benefit due to Loss Carryback Income / (Loss) Before Income Tax		$enter a dollar amount
select an income statement item Future Benefit due to Loss Carryforward Current Benefit due to Loss Carryback Deferred Tax Asset Deferred Tax Liability Income / (Loss) Before Income Tax Net Income / (Loss)		enter a dollar amount
				enter a subtotal of the two previous amounts
select a closing name for this statement Income / (Loss) Before Income TaxNet Income / (Loss)Future Benefit due to Loss CarryforwardCurrent Benefit due to Loss CarrybackDeferred Tax AssetDeferred Tax Liability				$enter a total net income or loss amount

Blue Spruce Inc. (Partial) Income Statement choose the accounting period December 31, 2021For the Month Ended December 31, 2021For the Year Ended December 31, 2021
select an income statement item Current Benefit due to Loss CarrybackDeferred Tax AssetIncome / (Loss) Before Income TaxNet Income / (Loss)Deferred Tax LiabilityFuture Benefit due to Loss Carryforward				$enter a dollar amount
enter an income statement item		$enter a dollar amount
enter an income statement item		enter a dollar amount
				enter a subtotal of the two previous amounts
select a closing name for this statement Net Income / (Loss)Deferred Tax AssetFuture Benefit due to Loss CarryforwardCurrent Benefit due to Loss CarrybackIncome / (Loss) Before Income TaxDeferred Tax Liability				$enter a total net income or loss amount