Prepare the income tax section of the 2011

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1. (NOL Carry back and Carry forward, Valuation Account versus No Valuation Account) Sondgeroth Inc. reports the following pretax income (loss) for both financial reporting purposes and tax purposes. (Assume the carry back provision is used for a net operating loss.) The tax rates listed were all enacted by the beginning of 2009.

(a) Prepare the journal entries for the years 2009-2012 to record income tax expense (benefit) and income tax payable (refundable) and the tax effects of the loss carry back and carry forward, assuming that at the end of 2011 the benefits of the loss carry forward are judged more likely than not to be realized in the future.

(b) Using the assumption in (a), prepare the income tax section of the 2011 income statement beginning with the line "Operating loss before income taxes."

(c) Prepare the journal entries for 2011 and 2012, assuming that based on the weight of available evidence, it is more likely than not that one-fourth of the benefits of the loss carry forward will not be realized.

(d) Using the assumption in (c), prepare the income tax section of the 2011 income statement beginning with the line "Operating loss before incometaxes." 

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Reference no: EM131108806

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