Question

Exercise 19-24 (Part Level Submission)

Flounder Inc. reports the following pretax income (loss) for both book and tax purposes. (Assume the carryback provision is used where possible for a net operating loss.)

Year		Pretax Income (Loss)			Tax Rate
2015		$123,000			40	%
2016		98,000			40	%
2017		(289,000	)		45	%
2018		119,000			45	%

The tax rates listed were all enacted by the beginning of 2015.

(a)

	Your answer is correct.

Prepare the journal entries for years 2015–2018 to record income tax expense (benefit) and income taxes 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 one-half of the benefits of the loss carryforward will not be realized. (Credit account titles are automatically indented when 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
2015
2016
2017
	(To record refund.)
	(To record allowance.)
2018
	(To record income taxes.)
	(To adjust allowance.)
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Attempts: 1 of 3 used

(b)

	Your answer is correct.

Prepare the income tax section of the 2017 income statement beginning with the line “Operating loss before income taxes.” (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Flounder Inc. Income Statement (Partial) December 31, 2017For the Year Ended December 31, 2017For the Quarter Ended December 31, 2017
DividendsExpensesBenefit Due to Loss CarrybackBenefit Due to Loss CarryforwardIncome Tax BenefitIncome Tax Expense - CurrentIncome Tax Expense - DeferredNet Income / (Loss)Operating Loss before Income TaxesRetained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues			$
DividendsExpensesBenefit Due to Loss CarrybackBenefit Due to Loss CarryforwardIncome Tax BenefitIncome Tax Expense - CurrentIncome Tax Expense - DeferredNet Income / (Loss)Operating Loss before Income TaxesRetained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
Dividends    Expenses    Benefit Due to Loss Carryback    Benefit Due to Loss Carryforward    Income Tax Benefit    Income Tax Expense - Current    Income Tax Expense - Deferred    Net Income / (Loss)    Operating Loss before Income Taxes    Retained Earnings, January 1    Retained Earnings, December 31    Revenues    Total Expenses    Total Revenues	$
Dividends    Expenses    Benefit Due to Loss Carryback    Benefit Due to Loss Carryforward    Income Tax Benefit    Income Tax Expense - Current    Income Tax Expense - Deferred    Net Income / (Loss)    Operating Loss before Income Taxes    Retained Earnings, January 1    Retained Earnings, December 31    Revenues    Total Expenses    Total Revenues
DividendsExpensesBenefit Due to Loss CarrybackBenefit Due to Loss CarryforwardIncome Tax BenefitIncome Tax Expense - CurrentIncome Tax Expense - DeferredNet Income / (Loss)Operating Loss before Income TaxesRetained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues			$
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(c)

	Your answer is partially correct. Try again.

Prepare the income tax section of the 2018 income statement beginning with the line “Income before income taxes.” (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Flounder Inc. Income Statement (Partial) December 31, 2018For the Year Ended December 31, 2018For the Quarter Ended December 31, 2018
CurrentDeferredDividendsExpensesIncome Tax Benefit Due to Loss CarrybackIncome Tax Benefit Due to Loss CarryforwardIncome Tax ExpenseNet Income / (Loss)Income before Income TaxesRetained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues		$
CurrentDeferredDividendsExpensesIncome Tax Benefit Due to Loss CarrybackIncome Tax Benefit Due to Loss CarryforwardIncome Tax ExpenseNet Income / (Loss)Income before Income TaxesRetained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues
Current    Deferred    Dividends    Expenses    Income Tax Benefit Due to Loss Carryback    Income Tax Benefit Due to Loss Carryforward    Income Tax Expense    Net Income / (Loss)    Income before Income Taxes    Retained Earnings, January 1    Retained Earnings, December 31    Revenues    Total Expenses    Total Revenues	$
Current    Deferred    Dividends    Expenses    Income Tax Benefit Due to Loss Carryback    Income Tax Benefit Due to Loss Carryforward    Income Tax Expense    Net Income / (Loss)    Income before Income Taxes    Retained Earnings, January 1    Retained Earnings, December 31    Revenues    Total Expenses    Total Revenues
Current    Deferred    Dividends    Expenses    Income Tax Benefit Due to Loss Carryback    Income Tax Benefit Due to Loss Carryforward    Income Tax Expense    Net Income / (Loss)    Income before Income Taxes    Retained Earnings, January 1    Retained Earnings, December 31    Revenues    Total Expenses    Total Revenues
CurrentDeferredDividendsExpensesIncome Tax Benefit Due to Loss CarrybackIncome Tax Benefit Due to Loss CarryforwardIncome Tax ExpenseNet Income / (Loss)Income before Income TaxesRetained Earnings, January 1Retained Earnings, December 31RevenuesTotal ExpensesTotal Revenues		$

Answer 1

	FLOUNDER Inc.
	Year	2015
	General , Journal
	Particular	Amt(Dr)	Amt(Cr)
	Income Tax Expense	$                                     49,200.00
	To Income Tax Payable		$          49,200.00
	Being amount of Income Tax Expense($123000*40%)
	Year	2016
	Income Tax Expense	$                                     39,200.00
	To Income Tax Payable		$          39,200.00
	Being amount of Income Tax Expense($98000*40%)
	Year	2017
	Income Tax Refund Receivable	$                                     88,400.00
	Deferred Tax Assets	$                                     30,600.00
	To Benefit due to loss carryback($123000*40%+98000*40%)		$          88,400.00
	To Benefit due to loss Carryforward ($289000-$123000-$98000)*45%		$          30,600.00
	(being amount od Income tax receivable and Deferred tax assets)
	Benefit due to loss carryforward($30600*50%)	$                                     15,300.00
	To Allowance to reduce Deferred Tax Assets		$          15,300.00
	(Being amount of 50% of Benefit due to loss carryforward)
	Year	2018
	Income Tax Expense	$                                     53,550.00
	To Deferred Tax Assets		$          30,600.00
	To Income Tax Payable		$          22,950.00
	(Being amount of Income Tax Expense)
	Allowance to reduce deferred tax assets to expected realizable value	$                                     15,300.00
	To Benefit due to loss carryforward		$          15,300.00
	(Being amount of Allowance to reduce deferred tax assets)
(b)	Operating Loss before Income Taxes		$     -2,89,000.00
	Income Tax Benefit
	Benefit due to loss carryback	$                                     88,400.00
	Benefit due to loss carryforward($30600-$15300)	$                                     15,300.00	$      1,03,700.00
	Net Loss		$     -1,85,300.00
c )	Income before Income Taxes		$      1,19,000.00
	Less:Income tax Expense
	Current Income tax	$                                     22,950.00
	Deferred Tax	$                                     30,600.00
	Benefit due to loss carryforward	$                                   -15,300.00	$          38,250.00
	Net Income		$          80,750.00