Question
Saginaw Inc. completed its first year of operations with a pretax loss of $747,500. The tax return showed a net operating loss of $909,500, which
Saginaw Inc. completed its first year of operations with a pretax loss of $747,500. The tax return showed a net operating loss of $909,500, which the company will carry forward. The $162,000 book-tax difference results from excess tax depreciation over book depreciation. Management has determined that they should record a valuation allowance equal to the net deferred tax asset. Assuming the current tax expense is zero and tax rate is 34 percent
a. | Prepare the journal entry to record the deferred tax consequences of the current year NOL before considering the valuation allowance. |
b. | Prepare the journal entry to record the deferred tax consequences of the depreciation book-tax difference. |
c. | Prepare the journal entry to record the deferred tax consequences of the valuation allowance. |
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