How should the operating loss carryforward be disclosed

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At the end of 2011, Sparkling Wine Company reported a pretax operating loss of $46,000 for both financial reporting and income tax purposes. In each of the years since Sparkling Wine began business in 2007, the company showed a profit and reported and paid taxes on the following pretax taxable income: $6,000 in 2007, $9,500 in 2008, $15,000 in 2009, and $19,000 in 2010. Sparkling Wine does not have evidence that it will be profitable in the future. The tax rate was 20% in 2007, 25% in 2008 and 2009, and 30% in 2010 and 2011, and no change has been enacted for future years.

Prepare the income tax journal entries of the Keene Company at the end of 2011.

Prepare the lower portion of Keene's 2011 income statement.

How should the operating loss carryforward be disclosed in the 2011 financial statements?

Assuming that Keene Company reports pretax income of $14,000 in 2012, prepare the income tax journal entry for the company at the end of 2012. Assume a 30% income tax rate.

Reference no: EM131776368

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