Topper Company reported the following pretax financial income (loss) for the years 2013 through 2017.

2013 .........$ 70,000

2014 ......... 45,000

2015 ......... (260,000)

2016 ......... 90,000

2017 ......... 215,000

Pretax financial income (loss) and taxable income (loss) were the same for all years involved. The enacted tax rate was 30% for 2013 through 2015, and 35% for 2016 and thereafter. Assume the carryback provision is used first for net operating losses.

Instructions

(a) Prepare the journal entries for the years 2013 through 2017 to record income tax expense, income tax payable (refundable), and the tax effects of the loss carryback and loss carryforward, assuming that based on the weight of available evidence, it is more likely than not that 60 percent of the benefits of the loss carryforward will not be realized.

(b) Prepare the income tax section of the 2015 income statement beginning with the line “Income (loss) before income taxes.”