Reference no: EM131775396

Question - Carryback and Carryforward of NOL, No Valuation Account, No Temporary Differences

The pretax financial income (or loss) figures for Jenny Spangler Company are as follows.

2002 $160,000

2003 250,000

2004 80,000

2005 (160,000)

2006 (380,000)

2007 120,000

2008 100,000

Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 45% tax rate for 2002 and 2003 and a 40% tax rate for the remaining years.

Instructions - Prepare the journal entries for the years 2004 to 2008 to record income tax expense and the effects of the net operating loss carrybacks and carryforwards assuming Jenny Spangler Company uses the carryback provision. All income and losses relate to normal operations. (In recording the benefits of a loss carryforward, assume that no valuation account is deemed necessary.)