Question
Marimarsh Corporation reported the following pretax financial income (loss) for the years 2019 to 2021. 2019 $150,000 2020 ($400,000) 2021 $200,000 Pretax financial income (loss)
Marimarsh Corporation reported the following pretax financial income (loss) for the years 2019 to 2021.
2019 | $150,000 |
2020 | ($400,000) |
2021 | $200,000 |
Pretax financial income (loss) and taxable income (loss) were the same for all years. The applicable tax rates are 30% for 2019, and 20% for 2020 and 2021.
Instructions:
a) Prepare the journal entry in 2019 to record income tax expense.
b) Prepare the journal entries in 2020 for the tax effects of the loss carryforward, assuming that based on the weight of evidence it is more likely than not that one-quarter of the benefits of the loss carryforward will not be realized.
c) Prepare the journal entry in 2021 to record income tax expense.
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