(NOL Carry back and Carry forward, Valuation Account Needed) Nielson Inc. reports the following pretax income (loss) for both book and tax purposes. (Assume the carry back provision is used where possible for a net operating loss.) The tax rates listed were all enacted by the beginning of 2009.
(a) Prepare the journal entries for years 2009′ “2012 to record income tax expense (benefit) and income tax payable (refundable), and the tax effects of the loss carry back and loss carry forward, assuming that based on the weight of available evidence, it is more likely than not that one-half of the benefits of the loss carry forward will not be realized.
(b) Prepare the income tax section of the 2011 income statement beginning with the line ‘Operating loss before income taxes.’
(c) Prepare the income tax section of the 2012 income statement beginning with the line ‘Income before incometaxes.’