Saginaw Inc. completed its first year of operations with a pretax loss of $647,500. The tax return showed a net operating loss of $807,500, which the company will carry forward. The $160,000 book-tax difference results from excess tax depreciation over book depreciation. Management has determined that it should record a valuation allowance equal to the net deferred tax asset. Assuming the current tax expense is zero, prepare the journal entries to record the deferred tax provision and the valuation allowance. (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 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. View transaction list Journal entry worksheet < 1 2 3 Record the deferred tax consequences for recognition of the current year NOL before considering the valuation allowance. Note: Enter debits before credits. Transaction a General Journal Debit Credit Record entry Clear entry View general journal
Saginaw Inc. completed its first year of operations with a pretax loss of $647,500. The tax return showed a net operating loss of $807,500, which the company will carry forward. The $160,000 book-tax difference results from excess tax depreciation over book depreciation. Management has determined that it should record a valuation allowance equal to the net deferred tax asset. Assuming the current tax expense is zero, prepare the journal entries to record the deferred tax provision and the valuation allowance. (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 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. View transaction list Journal entry worksheet < 1 2 3 Record the deferred tax consequences for recognition of the current year NOL before considering the valuation allowance. Note: Enter debits before credits. Transaction a General Journal Debit Credit Record entry Clear entry View general journal
Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter2: Financial Statements, Cash Flow,and Taxes
Section: Chapter Questions
Problem 19P: The Bookbinder Company had 500,000 cumulative operating losses prior to the beginning of last year....
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Transcribed Image Text:Saginaw Inc. completed its first year of operations with a pretax loss of $647,500. The tax return showed a net
operating loss of $807,500, which the company will carry forward. The $160,000 book-tax difference results from
excess tax depreciation over book depreciation. Management has determined that it should record a valuation
allowance equal to the net deferred tax asset. Assuming the current tax expense is zero, prepare the journal entries
to record the deferred tax provision and the valuation allowance. (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 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.
View transaction list
Journal entry worksheet
<
1
2
3
Record the deferred tax consequences for recognition of the current year NOL
before considering the valuation allowance.
Note: Enter debits before credits.
Transaction
a
General Journal
Debit
Credit
Record entry
Clear entry
View general journal
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