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Intermediate Accounting: Reporting...
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Intermediate Accounting: Reporting...
Tally & Co. incurred a pretax operating loss of $100,000 in its first year of operations for both financial reporting and income tax purposes. However, it expects to be profitable in the future. Its expected future income tax rate is 25%. Prepare Tally & Co.’s journal entry to record its operating loss carryforward.
Prepare journal entry to record the operating loss carry forward.
Net Operating Loss Carry forward:Â The net operating loss is considered as negative taxable income. When the tax-deductible expenses exceed the taxable revenues, the net operating loss is carry forwarded as it helps in getting deductions in future taxable amount.
Prepare journal entry to record the operating loss carry forward:
| Date | Accounts title and explanation | Post Ref. | Debit | Credit |
| 2019 | Â | Â | Â | Â |
| December 31 | Deferred Tax Asset | Â | $25,000 | Â |
| Â | Â Â Â Â Income Tax Benefit From Operating Loss Carry Forward | Â | Â | $25,000 |
| Â | (To record deferred tax asset for carry fo... |
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