Question 3: (7 marks)

Eagle Company records the following pretax financial income (loss) for both book and tax purposes.

Year	Pretax financial Income (Loss)	Tax Rate
2013	150,000	15%
2014	220,000	20%
2015	(500,000)	25%
2016	300,000	30%

Required

(a) Prepare the journal entries for the years 2013-2016 to report income tax expense (benefit) and income tax payable (refundable) and the tax effects of the loss carryback and carryforward, considering that the end of 2015 it is possible that the benefits of the loss carryforward will be realized in the upcoming years. (1+1+1+1=4 marks)

(b) Utilizing the proposition in (a), construct the income tax section of the 2015 income statement, beginning with the line Operating loss before income taxes.(1 mark)

(c) Prepare the journal entries for 2015 and 2016, considering that based on the weight of available evidence at 12/31/15, it is possible that 25% of the benefits of the loss carryforward will not be realized. (1+1=2 marks)

a)

Date	Account title	Debit	Credit
2013
2014
2015
2016

b)

c)

Date	Account title	Debit	Credit
2015
2016