Chapter 17, Problem 17.16E

Net Operating Loss, Carryforward, Tax Rate Change. Hamilton Container Company reported the following income (loss) information for the first 4 years of its operations.

Year	Income (Loss) before Tax	Tax Rate (%)
1	$(400,000)	40%
2	100,000	34
3	230,000	34
4	620,000	42

There are no uncertainties about the realization of the net operating loss benefits. All tax rate changes were enacted as of the beginning of the year. All tax rate changes are not known until the year of change.

Required

1. a. Prepare the journal entry(ies) needed to record the annual tax provision for Years 1 through 4.
2. b. Prepare a partial income statement for each year.
3. c. Prepare the footnote in both dollars and percentages required to reconcile Hamilton's federal tax rate to its effective income tax rate each year.