(NOL Carryforward, Valuation Account Needed) Topper Company reported the following pretax financial income (loss) for...
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Accounting
(NOL Carryforward, Valuation Account Needed)
Topper Company reported the following pretax financial income (loss) for the years 2018 through 2022:
2018 $ 70,000
2019 45,000
2020 (260,000)
2021 90,000
2022 215,000
Pretax financial income (loss) and taxable income (loss) were the same for all years involved. The enacted tax rate was 30% for 2018 through 2020, and 20% for 2021 and thereafter.
Instructions
(a) Prepare the journal entries for the years 2018 through 2022 to record income tax expense, income tax payable (refund- able), and the tax effects of the loss carryforward, assuming that based on the weight of available evidence, it is more likely than not that 60 percent of the benefits of the loss carryforward will not be realized.
(b) Prepare the income tax section of the 2020 income statement beginning with the line Income (loss) before income taxes.
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