Reference no: EM131590139

Part A - Colorado Company has provided you the following information.

Year       Taxable income         Income tax rate

2014       $390,000                   35% 

2015       $320,000                   37%

2016       $400,000                   40%

2017       ($1,200,000)              40%

Colorado Company has decided to use the loss carryback and carryforward provision as a result of the year 2017 loss. The enacted tax rate remains at 40% after year 2017. Colorado Company has determined that a valuation allowance is not necessary.

Prepare the journal entry on December 31, 2017 to record the carryback and carryforward decision.

Part B - The Matrix Company began operations as of the beginningof 2015. During 2015, Matrix reported GAAP (book) income before taxes of $789,500. For income tax purposes, depreciation expense was $150,000; for GAAP (book) purposes, depreciation expense was $74,000. Matrix accrued $900,000 of revenue for GAAP (book) purposes during 2015; $600,000 of the accrued revenue was taxable during 2015. Matrix earned interest of $79,800 from a municipal bond investment during 2015. Matrix's marginal income tax rate is 40%. Matrix did not make any income tax payments during 2015.

a. Determine Matrix's taxable income for the year ended December 31, 2015.

b. Prepare the 2015 year-end journal entry to record income tax expense.