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lara [203]
3 years ago
11

In 2018, its first year of operations, Kimble Corp. has a $740,000 net operating loss when the tax rate is 35%. In 2019, Kimble

has $290,000 taxable income and the tax rate remains 35%. Assume the management of Kimble Corp. thinks that it is more likely than not that the loss carryforward will not be realized in the near future because it is a new company (this is before results of 2019 operations are known). What are the entries in 2018 to record the tax effects of the loss carryforward?
Business
1 answer:
ivanzaharov [21]3 years ago
5 0

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)

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