Question
After several years of recognizing profits, Westly Inc. experiences a net operating loss in 2020 of $25,000. The company applied the net operating loss carryfoward
After several years of recognizing profits, Westly Inc. experiences a net operating loss in 2020 of $25,000. The company applied the net operating loss carryfoward method. In 2021, Westly Inc. rebounds with earnings before taxes of $10,000. Westlys tax rate for all years is 25% and the company determines that no valuation allowance for any deferred tax assets is required. Assume no deferred income taxes before 2020.
What amount should Westly Inc. recognize as its net deferred tax asset balance at the end of 2021 if the company determines it is more likely than not that 60% of the deferred tax asset will not be realized.
Select one:
a. $2,550
b. $1,500
c. $2,500
d. $1,700
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