Prepare the following for 2015:
a) The necessary journal entry to record the NOL carryforward.
b) A partial income statement beginning with sales revenue.
What will be an ideal response?
Answer:
a) Journal Entry:
Deferred Tax Asset
33,440
Income Tax Benefit
33,440*
*[(486,000 – 574,000) × 38%]
b) Partial Income Statement:
Sales revenue $486,000
Operating Expenses (574,000)
Net Loss before tax benefit (88,000)
Income tax benefit 33,440
Net loss after tax benefit $(54,560)