a. Prepare the journal entry to record the deferred tax consequences for recognition of the current year NOL before considering 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.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Saginaw Incorporated completed its first year of operations with a pretax loss of $677,500. The tax return showed a net operating
of $826,500, which the company will carry forward. The $149,000 book-tax difference results from an increase in taxable tempora
differences (i.e., excess tax depreciation over book depreciation). Management has determined that it should record a valuation
allowance equal to the net deferred tax asset. Assume the current tax expense is zero.
Note: If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.
Required:
a. Prepare the journal entry to record the deferred tax consequences for recognition of the current year NOL before considering t
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.
Transcribed Image Text:Saginaw Incorporated completed its first year of operations with a pretax loss of $677,500. The tax return showed a net operating of $826,500, which the company will carry forward. The $149,000 book-tax difference results from an increase in taxable tempora differences (i.e., excess tax depreciation over book depreciation). Management has determined that it should record a valuation allowance equal to the net deferred tax asset. Assume the current tax expense is zero. Note: If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Required: a. Prepare the journal entry to record the deferred tax consequences for recognition of the current year NOL before considering t 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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