Answer:
Explanation:
The journal entries are shown below:
a) Deferred tax asset A/c Dr  $259,000          ($740,000 × 35%)
           To benefit due to loss carry forward $259,000       
(Being recording of the carry forward amount is done)
Benefit due to loss carry forward A/c  Dr $259,000       
         To allowance to reduce deferred tax to expected realizable value $259,000       
(Being allowance amount is recorded)
b) Income tax expense A/c Dr.  $101,500        ($290000 × 35%)
         To Deferred Tax Asset A/c $101,500  
(Being recording of current tax and deferred tax is done) 
Allowance to reduce deferred tax to expected realizable value Dr $101,500  
             To benefit due to loss carry forward $101,500 
(Being allowance eliminated and carry forward loss is recorded)