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Question 14BE

Expert-verified
Intermediate Accounting (Kieso)
Found in: Page 1094

Short Answer

Use the information for Rode Inc. given in BE19-13. Assume that it is more likely than not that the entire net operating loss carryforward will not be realized in future years. Prepare all the journal entries necessary at the end of 2017.

The net operating loss is the type of loss an organization suffers when the allowable deduction of the firm is higher than the amount of taxable income during a financial year.

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Step by Step Solution

Determining the amount of loss carryback and loss carryforward amount for 2013

Recording of journal entry for 2018

Rode Inc.
Journal entry for the year 2018

Date

Particulars

Debit

Credit

2018

Income tax refund receivables Dr.

$140,000

To Benefit due to loss carryback

$140,000

(To record the loss carryback for 2018)

2018

Deferred tax asset Dr.

$60,000

To Benefit due to loss carryforward

$60,000

(To record the loss carryforward for 2018)

2018

Benefit due to loss carryforward Dr.

$60,000

To Allowance to reduce deferred tax asset to expected realizable value

$60,000

(To record the allowance to reduce the deferred tax asset for 2018)

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