Bridgeport Inc. incurred a net operating loss of $578,700 in 2020. Combined income for 2017, 2018, and 2019 was $459,700. The tax rate for all years is 30%. Assume that it is more likely than not that the entire tax loss carryforward will not be realized in future years. Assume that Bridgeport earns taxable income of $20,800 in 2021 and that at the end of 2021 there is still too much uncertainty to recognize a deferred tax asset. Prepare the journal entries that are necessary at the end of 2021 assuming that Bridgeport does not use a valuation allowance account. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Debit Credit Year Account Titles and Explanation 2021 (To record current tax expense) (To record current tax benefit) Prepare the journal entries that are necessary at the end of 2021 assuming that Bridgeport does use a valuation allowance account. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Debit Credit Year Account Titles and Explanation 2021 (To record deferred tax expense) (To bring the Deferred Tax Asset account to its realizable value) 2021 2021 ||| 001
Bridgeport Inc. incurred a net operating loss of $578,700 in 2020. Combined income for 2017, 2018, and 2019 was $459,700. The tax rate for all years is 30%. Assume that it is more likely than not that the entire tax loss carryforward will not be realized in future years. Assume that Bridgeport earns taxable income of $20,800 in 2021 and that at the end of 2021 there is still too much uncertainty to recognize a deferred tax asset. Prepare the journal entries that are necessary at the end of 2021 assuming that Bridgeport does not use a valuation allowance account. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Debit Credit Year Account Titles and Explanation 2021 (To record current tax expense) (To record current tax benefit) Prepare the journal entries that are necessary at the end of 2021 assuming that Bridgeport does use a valuation allowance account. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Debit Credit Year Account Titles and Explanation 2021 (To record deferred tax expense) (To bring the Deferred Tax Asset account to its realizable value) 2021 2021 ||| 001
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
18
Transcribed Image Text:Bridgeport Inc. incurred a net operating loss of $578,700 in 2020. Combined income for 2017, 2018, and 2019 was $459,700. The tax
rate for all years is 30%. Assume that it is more likely than not that the entire tax loss carryforward will not be realized in future years.
Assume that Bridgeport earns taxable income of $20,800 in 2021 and that at the end of 2021 there is still too much uncertainty to
recognize a deferred tax asset.
Prepare the journal entries that are necessary at the end of 2021 assuming that Bridgeport does not use a valuation allowance
account. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required,
select "No Entry" for the account titles and enter O for the amounts.)
Year Account Titles and Explanation
Debit
Credit
2021
(To record current tax expense)
(To record current tax benefit)
Prepare the journal entries that are necessary at the end of 2021 assuming that Bridgeport does use a valuation allowance
account. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required,
select "No Entry" for the account titles and enter O for the amounts.)
Year Account Titles and Explanation
Debit
Credit
2021
(To record deferred tax expense)
(To bring the Deferred Tax Asset account to its realizable
value)
2021
2021
||
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