Riley Inc. reports the following pre$-$tax incomes $($losses$)$ for both financial reporting purposes and tax purposes:

Year

Accounting Income $($Loss$)$

Tax Rate

$2021$

$ $120,000$

$25\%$

$2022$

$90,000$

$25\%$

$2023$

$(280,000)$

$30\%$

$2024$

$220,000$

$30\%$

The tax rates listed were all enacted by the beginning of $2021.$ Riley reports under the ASPE future income taxes method.

Instructions

Prepare the journal entries for each of the years $2021$ to $2024$ to record income tax. Assume the tax loss is first carried back and that, at the end of $2023,$ the loss carryforward benefits are judged more likely than not to be realized in the future.

Using the assumptions in part $($a$),$ prepare the income tax section of the $2023$ and $2024$ income statements, beginning with the line $$Income $($loss$)$ before income tax.$$

Prepare the journal entries for $2023$ and $2024.$ Assume that it is more likely than not that one quarter of the carryforward benefits will not be realized. This company does not use a valuation allowance.

Using the assumptions in part $($c$),$ prepare the income tax section of the $2023$ and $2024$ income statements, beginning with the line $$Income $($loss$)$ before income tax.$$

Using the assumptions in part $($c$),$ discuss what information should be disclosed in the notes to the financial statements.