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)
