In 2013, its first year of operations, Landon Corp. has a $700,000 net operating
ID: 2497237 • Letter: I
Question
In 2013, its first year of operations, Landon Corp. has a $700,000 net operating loss when the tax rate is 30%. In 2014, Landon has $300,000 taxable income and the tax rate remains 30%. REQUIRED:
(a) Assume the management of Landon Corp. thinks that it is more likely than not that the loss carryforward will be realized in the near future because of a major contract that is expected to be signed in early 2015. Prepare the journal entry(s) to record income taxes for 2013 and 2014.
**************(b) Assume that at the end of 2014, the management of Landon Corp. thinks that it is more likely than not that the loss carryforward will not be realized in the near future. What additional journal entry should be made at the end of 2014?
Explanation / Answer
a ) 2013
as they are supposed to be realised in the near future so carryforward
2014
This will be recorded as expense for that year however adjusted against Defered tax assets
b) that it is more likely than not that the loss carryforward will not be realized in the near future so a reverse effect for 2013 is passed as below using the that it is more likely than not that the loss carryforward will not be realized in the near future and the taxes are expensed out
2013 2014 net operating loss 700000 net operating Profit 30000 Tax rate 30% Tax rate 30% 210000 9000Related Questions
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