Question
Mina Corporation began operations in 2018. There have been no permanent or temporary differences to account for since the inception of the business. The following
Mina Corporation began operations in 2018. There have been no permanent or temporary differences to account for since
the inception of the business. The following data are available:
| Year 2018 2019 2020 2021 | Enacted Tax Rate 45% 40% 30% 30% | Taxable Income $1,440,000 1,800,000 | Taxes Paid $648,000 720,000 |
In 2020, Mina had a net operating loss (NOL*) of $4,200,000. Assuming the company decides to first carryback the NOL and then to carry forward any unused NOL against the future taxable incomes.
*= Net Operating Loss
Referring to information on page 3, assuming the company decides to carry forward any unused NOL
of 2020 and that it is more likely than not that the company will realize the entire unused NOL carry
forward in the future, what journal entry(s) should the company make at December 31st, 2020 to record
the effects of this unused NOL being carried forward?
Debit Credit
| A) | Deferred Tax Assets | $288,000 |
|
|
| Benefit Due to Loss Carry forward |
| $288,000 |
|
|
|
|
|
| B) | Income Tax Refund Receivable | $240,000 |
|
|
| Benefit Due to Loss Carryback |
| 240,000 |
|
|
|
|
|
| C) | Income Tax Payable | 240,000 |
|
|
| Income Tax Expense |
| 240,000 |
|
|
|
|
|
| D) | Deferred Tax Assets | $240,000 |
|
|
| Benefit Due to Loss Carry forward |
| $240,000 |
|
|
|
|
|
| E) | None of the above |
|
|
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Essentials Of Xbrl Financial Reporting In The 21st Century
Authors: Bryan Bergeron
1st Edition
0471220779, 978-0471220770
