Question

You are viewing Attempt 1 Bey Accounting ekly Updates Tamarisk Inc. reports the following pretax income (loss) for both book and tax purposes dent Practice and utions Manual ley CPAexcel ntinued Access Pretax Year Income (Loss) Tax Rate 2018 $114,000 20% 2019 91,000 20% 2020 (300,000) 25% 2021 125,000 25 % cussions nferences laborations The tax rates listed were all enacted by the beginning of 2018 LeyPLUS Support

Answer 1

Date	Accounts Title & Explanation	Debit	Credit
2018	Income Tax Expense	$22,800
	Income tax payable		$22,800
2019	Income Tax Expense	$18,200
	Income tax payable		$18,200
2020	Deferred Tax assets	$37,500
	Income Tax Benefit		$37,500
2021	Income Tax Expense	$31,125
	Deferred Tax assets		$31,125

In 2020 Loss is $300,000 but on the basis of available evidence 50% of benefits of loss can be can be taken in future. So DTA will be created @ 25% on $150,000 = $37,500

$37,500 is income tax benefit which can be availed in future.

In 2021 Income tax is not payable as it is adjusted against carry forward loss. But we will book Income tax expense for the amount 25% on Taxable profit $125,000. For the same amount DTA will be reduce.