Question 2

Lindemax Inc. 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.)

Year	Pretax Income (Loss)	Tax Rate
204	220,000	34%
205	180,000	34%
206	(520,000)	38%
207	440,000	38%

The tax rates listed were all enacted by the beginning of 2014.

Instructions

Prepare the journal entries for the years 204-207 to record income tax expense (benefit) and income tax payable (refundable) and the tax effects of the loss carryback and carryforward, assuming that the end of 206 it is probable that the benefits of the loss carryforward will be realized in the future.