In Year 1, Cardinals Company operated at a tax loss, totaling ($105,600) during its first year of business. b. Cardinals Company determined that it was more likely than not that 75% of the deferred tax asset would not be realized. Prepare the entry to record a deferred tax asset valuation allowance, assuming a zero beginning balance in that account. Recording Net Operating Loss Carryforward • Note: If a line in a journal entry isn't required for the transaction, in the last line of the journal entry, select "N/A" as the account name and leave the Dr. and Cr. answers blank (zero). a. Assuming a tax rate of 25%, and that income is expected in Year 2, record the entry to reflect the tax benefit of the net operating loss on December 31 of Year 1. Account Name Dr. Cr. Date a. Dec. 31 Deferred Tax Asset Income Tax Expense Income Tax Payable To record tax benefit of net operating loss b. Dec. 31 Income Tax Expense Valuation Allowance for Deferred Tax Asset To record allowance for deferred income tax V 26,400 0 0 19,800 0 0✔ 0x 0x 0✓ 19,800
In Year 1, Cardinals Company operated at a tax loss, totaling ($105,600) during its first year of business. b. Cardinals Company determined that it was more likely than not that 75% of the deferred tax asset would not be realized. Prepare the entry to record a deferred tax asset valuation allowance, assuming a zero beginning balance in that account. Recording Net Operating Loss Carryforward • Note: If a line in a journal entry isn't required for the transaction, in the last line of the journal entry, select "N/A" as the account name and leave the Dr. and Cr. answers blank (zero). a. Assuming a tax rate of 25%, and that income is expected in Year 2, record the entry to reflect the tax benefit of the net operating loss on December 31 of Year 1. Account Name Dr. Cr. Date a. Dec. 31 Deferred Tax Asset Income Tax Expense Income Tax Payable To record tax benefit of net operating loss b. Dec. 31 Income Tax Expense Valuation Allowance for Deferred Tax Asset To record allowance for deferred income tax V 26,400 0 0 19,800 0 0✔ 0x 0x 0✓ 19,800
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter2: Financial Statements, Cash Flow,and Taxes
Section: Chapter Questions
Problem 19P: The Bookbinder Company had 500,000 cumulative operating losses prior to the beginning of last year....
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