Question
16 ABC Companies is incorporated in Delaware, E.U. In 2020, its first year of operations, ABC reported an operating loss of $538,944 on its books
16
ABC Companies is incorporated in Delaware, E.U. In 2020, its first year of operations, ABC reported an operating loss of $538,944 on its books and tax return. During the first two years of operations, there were NO permanent or temporary differences between book income and taxable income. The legislated tax rate for 2020 is 0.39 and for all subsequent periods a rate of 0.29 has already been legislated. The business expects to report income of $724,287 for 2021 on both the payroll and the books. Therefore, the benefit of any deferred tax asset is more likely to be realized. Under the new reform, the entry for the 2020 tax expense will use a
a. debit to Deferred Tax Asset for $210043
b. credit to Income Tax Benefit for $156294
c. debit to Income Tax Benefit for $156294
d. debit to Deferred Tax Asset for $210188
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