Question

reyes Company has a loss carryforward of $490,000 and an income tax rate of 20 percent. What journal entry they would use to record this?

Answer 1

Answer: Benefit Due to Loss Carryforward (Income Tax Expense)    $98,000

Explanation:

Loss carryforward = $490,000

Income tax percent = 20% =0.20

"Deferred Tax Asset" can be computed as:

Deferred Tax Asset =(Income tax percent ) x (Loss carryforward )

= 0.20 x ($490,000)

= $98,000

Journal entry:

Benefit Due to Loss Carryforward (Income Tax Expense)    $98,000