Answer:
A. 2014
Dr Deferred Tax Asset $240,000
Cr Benefit Due to Loss Carryforward $240,000
Dr Benefit Due to Loss Carryforward $240,000
Cr Allowance to Reduce Deferred Tax Asset to Expected Realizable Value $240,000
B. 2015
Dr Income Tax Expense $105,000
Cr Deferred Tax Asset $105,000
Dr Income Tax Expense $60,000
Cr Allowance to Reduce Deferred Tax Asset to Expected Realizable Value $60,000
Explanation:
A. Preparation of the Journal entries needed in 2014
Dr Deferred Tax Asset $240,000
($800,000 × 30%)
Cr Benefit Due to Loss Carryforward $240,000
Dr Benefit Due to Loss Carryforward $240,000
Cr Allowance to Reduce Deferred Tax Asset to Expected Realizable Value $240,000
($800,000 × 30%)
B.Preparation of the Journal entries needed in 2015
Dr Income Tax Expense $105,000
($350,000 × 30%)
Cr Deferred Tax Asset $105,000
Dr Income Tax Expense $60,000
Cr Allowance to Reduce Deferred Tax Asset to Expected Realizable Value $60,000
