Intermediate Accounting, Student Value Edition (2nd Edition)

2nd Edition

ISBN: 9780134732145

Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella

Publisher: PEARSON

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Textbook Question

Chapter 17, Problem 17.9P

Net Operating Loss, Carryback. Carryforward. CPF Corporation reported the following results for its first 3 years of operation.

Description	Amount
2018 income (before income taxes)	$80,000
2019 loss (before income taxes)	(620,000)
2020 income (before income taxes)	800,000

There were no permanent or temporary differences during these 3 years. Assume a corporate tax of 46% for 2018.40% for 2019, and 34% for 2020 CPF elects to use the carryback-carryforward provision. All tax rates were enacted at the beginning of the year No tax rate changes are known until the year of change

Required

a. What income (loss) should CPF report in 2019? (Assume that any deferred tax asset recognized is more likely than not to be realized.)
b. Prepare the journal entry(ies) to record the tax provision for 2019.
c. Prepare the journal entry or entries to record the tax provision for 2020
d. Independent of your answer to part (a)_; assume now that CPF elects to use the carryforward-only provision, not the carryback provision. What income (loss) does CPF report in 2019?
e. Using the assumptions made in part (d), prepare the journal entry entries for 2019
f. Using the assumptions made in part (d). prepare the journal entry entries for 2020

Definition Definition Items on the balance sheet that are created when the tax paid is more than tax considered on the income statement. Deferred tax assets result from overpayment and advance payment of taxes. They are recorded on the assets side of the balance sheet. A deferred tax asset results in the reduction of a future tax payment and is beneficial to the company. It arises when the profit as per tax laws is more than the profit as per books of accounts.

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Chapter 17, Problem 17.8P

Chapter 17, Problem 17.10P

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Chapter 17 Solutions

Intermediate Accounting, Student Value Edition (2nd Edition)

Ch. 17 - Prob. 17.1Q Ch. 17 - When will income tax expense and income taxes...Ch. 17 - Will permanent differences cause the effective tax...Ch. 17 - When do permanent differences arise?Ch. 17 - How are deferred tax assets and deferred tax...Ch. 17 - Prob. 17.6Q Ch. 17 - Prob. 17.7Q Ch. 17 - Prob. 17.8Q Ch. 17 - Prob. 17.9Q Ch. 17 - How does a firm determine the need for a valuation...

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Solution Summary: The author concludes that net loss after tax benefit to be reported in 2019 amounts to 367,200.

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