In $2025,$ its first year of operations, Oriole Corp. has a $$850,000$ net operating loss when the tax rate is $20\%.$ In $2026,$ Oriole has

$$400,000$ in taxable income and the tax rate remains $20\%.$

Assume that the management of Oriole thinks that it is more likely than not that the loss carryforward will not be realized in the near

future because it is a new company $($this is before results of $2026$ operations are known$).$

What journal entries would Oriole make in $2025$ to record the tax effects of the loss carryforward? $($Credit account titles are

automatically indented when amount is entered. Do not indent manually. If no entry is required, select $"$No Entry" for the account titles and

enter $0$ for the amounts. List all debit entries before credit entries.$)$

Account Titles and Explanation

Debit

Credit

Deferred Tax Asset

Income Tax Expense

$($To recognize benefit of loss carryforward$)$

Income Tax Expense

Allowance to Reduce Deferred Tax Asset to Expected Rea

$($To record allowance amount$)$

What journal entries would Oriole make in $2026$ to record the current and deferred income taxes and to recognize the loss

carryforward? $($Assume that at the end of $2026$ it is more likely than not that the deferred tax asset will be realized.$)($Credit

account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select $"$No Entry" for the

account titles and enter $0$ for the amounts. List all debit entries before credit entries.$)$

Account Titles and Explanation

Debit

Credit

Deferred Tax Asset

$($To record current and deferred income taxes$)$

Allowance to Reduce Deferred Tax Asset to Expected Realiz

$($To eliminate the allowance$)$