Newton Corporation began operations in 2015 and had financial income before taxes and taxable income for the year ending 12/31/2015 of $400,000. Their tax rate was 30%. They properly recorded the following entry at 12/31/2015:

Income Tax Expense...............$85,000

Income Tax Payable.............................$85,000

Early in 2016 they paid their taxes and continued operating their business. Due to a downturn in the economy, they had a net operating loss of $750,000 for the period ending 12/31/2016. Once again, they had no permanent or temporary differences.

(A.) Prepare the appropriate journal entry(ies) related to income taxes for the period ending 12/31/2016. The tax rate remains at 30%.

(B.) Assume the management at Newton Corporation thinks that it is more likely than not that 50% of the loss carryforward will not be realized because it is a new company and profits are not predicted (this is before results of 2017 operations are known).

Prepare any additional journal entry(ies) for 12/31/2016. If none is needed, indicate N/A.

(C.) What impact do parts (A) & (B) have on the income statement? (Indicate amount and decrease/increase).

In 2017, Newton Corporation recovers and has an operating income of $350,000. Taxable income and financial income before taxes remain the same and the tax rate remains at 30%. Assume that at the end of 2017 it is more likely than not that all of the deferred tax assets will be realized in the future.

(D.) Prepare all necessary tax entries for 2017.