Jennings inc. reported the following pretax income (loss)

P19-5 Jennings Inc. reported the following pretax income (loss) and related tax rates during the years 2010–2016.

Year     Pretax Income (Loss)   Tax Rate

2010    $40,000                                   30%

2011    25,000                         30%

2012    50,000                         30%

2013    80,000                         40%

2014    -180,000                      45%

2015    70,000                         40%

2016    100,000                                   35%


Pretax financial income (loss) and taxable income (loss) were the same for all years since Jennings began business. The tax rates from 2013–2016 were enacted in 2013.



a. Prepare the journal entries for the years 2014–2016 to record income taxes payable (refundable),      income tax expense (benefit), and the tax effects of the loss carryback and carryforward. Assume      that Jennings elects the carryback provision where possible and expects to realize the benefits of      any loss carryforward in the year that immediately follows the loss year.

(b) Indicate the effect the 2014 entry(ies) has on the December 31, 2014, balance sheet.

(c) Prepare the portion of the income statement, starting with “Operating loss before income taxes,”      for 2014

(d) Prepare the portion of the income statement, starting with “Income before income taxes,” for 2015.