Pretax financial income (loss) and taxable income (loss) were the same for all years involved. The enacted tax rate was 34% for 2006 and 2007, and 40% for 2008-2010. Assume the carryback provision is used first for net operating losses.
a) Prepare a net operating loss schedule
b) Prepare the journal entries for the years 2006-2010 to record income tax expense, income tax payable (refundable), and the tax effects of the loss carryback and loss carryforward. Record an allowance assuming that based on the weight of available evidence, it is more likely than not that one-fifth of the benefits of the loss carryforward will not be realized.
c) Prepare the income tax section of the 2009 income statement beginning with the line "Income (loss) before income taxes."
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