Question: (NOL Carryback and Carryforward, Valuation Account Needed) Meyer reported the following pretax financial income (loss) for the years 2012-2016.

2012                $240,000

2013                 350,000

2014                 120,000

2015                (570,000)

2016                 180,000

Pretax financial income (loss) and taxable income (loss) were the same for all years involved. The enacted tax rate was 34% for 2012 and 2013, and 40% for 2014-2016. Assume the carryback provision is used first for net operating losses.

(a) Prepare the journal entries for the years 2014-2016 to record income tax expense, income taxes payable (refundable), and the tax effects of the loss carryback and loss carry forward, assuming that based on the weight of available evidence, it is more likely than not that one-fifth of the benefits of the loss carry forward will not be realized.

(b) Prepare the income tax section of the 2015 income statement beginning with the line "Income (loss) before income taxes."