1. In 2020, Bob Enterprises incurred a $850,000 net operating loss. In 2021, Bob Enterprises reported pretax income of $615,000.

For all years, the tax rate is 21% and there were no differences between taxable income and pretax financial statement income. Also, assume the current tax law (under the TCJA of 2017 that does not allow loss carrybacks).

Instructions

1. Record the entries in 2021 to reflect all income tax considerations. (Assume at the end of 2021 management believes that it is likely that the remaining carryforward benefit will be fully realized.)

2. What is the net tax expense/benefit that Bob should report on the 2021 income statement?