Recording and Reporting NOL Carryforward, Valuation Allowance The financial statements of Gibson Corporation for the first two years of operations reflected the following amounts. 2020 2021 Revenues $590,000 $660,000 Expenses $640,000 630,000 Pretax income (loss) $(50,000) $30,000 Assume a tax rate of 25% for 2020 and 2021. Estimates of future earnings at the end of each year, 2020 and 2021 are zero. There are no temporary differences. Required a. Provide entries to record the NOL income tax effects for 2020 and 2021. Note: List multiple debits (when applicable) in alphabetical order and list multiple credits (when applicable) in alphabetical order. Note: If the journal entry includes an extra line that is not required, select "N/A" as the account name and leave the Dr. and Cr. answers blank (zero) in the very last row of the journal entry. Account Name Dr. cr. Date Dec. 31, 2020 To recognize deferred tax asset Dec. 31, 2020 To adjust valuation allowance Dec. 31, 2021 To recognize income tax expense Dec. 31, 2021 To adjust valuation allowance b. Present Gibson's 2020 and 2021 financial statements, incorporating the income tax effects. Note: Use a negative sign to indicate a loss. Income statement 2020 2021 Revenue A Expenses Pretax income (loss) Income tax expense Income (loss) 2020 2021 Balance Sheet, Dec. 31 Noncurrent assets Deferred tax asset, net $ Current liabilities Income tax payable $ $ Recording and Reporting NOL Carryforward, Valuation Allowance The financial statements of Gibson Corporation for the first two years of operations reflected the following amounts. 2020 2021 Revenues $590,000 $660,000 Expenses $640,000 630,000 Pretax income (loss) $(50,000) $30,000 Assume a tax rate of 25% for 2020 and 2021. Estimates of future earnings at the end of each year, 2020 and 2021 are zero. There are no temporary differences. Required a. Provide entries to record the NOL income tax effects for 2020 and 2021. Note: List multiple debits (when applicable) in alphabetical order and list multiple credits (when applicable) in alphabetical order. Note: If the journal entry includes an extra line that is not required, select "N/A" as the account name and leave the Dr. and Cr. answers blank (zero) in the very last row of the journal entry. Account Name Dr. cr. Date Dec. 31, 2020 To recognize deferred tax asset Dec. 31, 2020 To adjust valuation allowance Dec. 31, 2021 To recognize income tax expense Dec. 31, 2021 To adjust valuation allowance b. Present Gibson's 2020 and 2021 financial statements, incorporating the income tax effects. Note: Use a negative sign to indicate a loss. Income statement 2020 2021 Revenue A Expenses Pretax income (loss) Income tax expense Income (loss) 2020 2021 Balance Sheet, Dec. 31 Noncurrent assets Deferred tax asset, net $ Current liabilities Income tax payable $ $
