Reference no: EM132776345

Eagle Company records the following pretax financial income (loss) for both book and tax purposes.

Year            Pretax financial Income (Loss)         Tax Rate

2013                       150,000                               15%

2014                      220,000                               20%

2015                     (500,000)                           25%

2016                      300,000                            30%

Required

Problem (a) Prepare the journal entries for the years 2013-2016 to report income tax expense (benefit) and income tax payable (refundable) and the tax effects of the loss carryback and carryforward, considering that the end of 2015 it is possible that the benefits of the loss carryforward will be realized in the upcoming years.

Problem (b) Utilizing the proposition in (a), construct the income tax section of the 2015 income statement, beginning with the line "Operating loss before income taxes."

Problem (c) Prepare the journal entries for 2015 and 2016, considering that based on the weight of available evidence at 12/31/15, it is possible that 25% of the benefits of the loss carryforward will not be realized.