Question
1. P had a before-tax loss of $100,000 for both financial accounting and tax purposes in 2021, and pays tax at a rate of 25%.
1. P had a before-tax loss of $100,000 for both financial accounting and tax purposes in 2021, and pays tax at a rate of 25%. As a result P will have:
1. A 2021 net loss of $100,000 and a deferred tax asset of $25,000
2. A 2021 net loss of $75,000 and a deferred tax asset of $100,000
3. A 2021 net loss of $100,000 and a deferred tax asset of $100,000
4. A 2021 net loss of $75,000 and a deferred tax asset of $25,000
2. Bagwell took an aggressive tax position that reduced taxable income from $500,000 to $400,000. Bagwell does not believe it is more likely than not that it would prevail in court if the position was questioned. Bagwell pays tax at a rate of 25%. Bagwells journal entry to account for taxes would include a debit to tax expense for $125,000.
1. True
2. False
3. B took an aggressive tax position that reduced taxable income from $500,000 to $400,000. B believes it is more likely than not that it would prevail in court if the position was questioned, and there is a 40% chance that $100,000 would be sustained, a 20% chance that $80,000 would be sustained, and a 40% chance that $50,000 would be sustained. Tax rate: 25%. JE to account for taxes include a Credit to Liabilityuncertain tax position of 5,000
1. True
2. False
4. Now assume that Bagwell took an aggressive tax position that reduced taxable income from $500,000 to $400,000, recorded a Liabilityuncertain tax position for $5,000, and in a later period learns that the entire position was upheld in court. Bagwell pays tax at a rate of 25%. Bagwells journal entry to account for taxes would include a debit to Liability uncertain tax position of $5,000.
1. True
2. False *****Please give the answers with your explanation. Thank you!
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