Answer:
NOL in 2019 (200000)
Income tax rate 30%
Maximum Tax benefit = 200000*30%
= 60000
a) Since company is more likely then not the one third of the benefits of the NOL carry forward will not be realized, therefore we need to accounts only deferred tax assets which can be realized in future year i.e. 2/3 of the benefit.
Journal entry for carry forward deferred tax assets:
Deferred tax assets (Balance sheet grouping) 40000
To Deferred tax assets (Profit and loss account grouping) 40000
b) Income statement after deferred tax assets on NOL
Pre-tax operating loss (200000)
Add: Deferred tax assets 40000
Post-tax operating loss (160000)
c) Balance sheet with Deferred tax assets:
Assets:
Deferred tax assets 40000
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Indigo Inc. reported the following pretax income (loss) and
related tax rates during the years 2013–2019.
Pretax Income (loss)
Tax Rate
2013
$38,500
30
%
2014
27,400
30
%
2015
45,100
30
%
2016
78,500
40
%
2017
(196,400
)
45
%
2018
79,600
40
%
2019
96,200
35
%
Pretax financial income (loss) and taxable income (loss) were the
same for all years since Indigo began business. The tax rates from
2016–2019 were enacted in 2016.
(a)
Prepare the...
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