Question

Pharoah Corporation has pretax financial income (or loss) from 2015 through 2021 as follows.

		Income (Loss)			Tax Rate
2015		$67,200			25	%
2016		(210,000	)		20	%
2017		126,000			20	%
2018		42,000			20	%
2019		147,000			20	%
2020		(84,000	)		25	%
2021		84,000			25	%

Pretax financial income (loss) and taxable income (loss) were the same for all years since Pharoah has been in business. In recording the benefits of a loss carryforward, assume that it is more likely than not that the related benefits will be realized.

A) What entries for income taxes should be recorded for 2016?

C) What entry for income taxes should be recorded in 2017?

E) What entry for income taxes should be recorded in 2020?

Answer 1

Ans: Journal entries

Date	Account title and explanation	Debit($)	Credit($)
2016	Deferred tax assets(210,000*20%	42,000
	benefits due to loss carried forward		42,000
	( to record carry forward)
2017	income Tax expense(126,000*20%)	25,200
	Deferred tax assets		25,200
	( to record income tax expense for 2017)
2020	Deferred tax assets (84,000*25)	21,000
	Income tax expense		21,000
	( to record the income tax benefit)