Prepare the journal entries that are necessary at the end

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Question - Kyle Inc. incurred a net operating loss of $580,000 in 2020. Combined income for 2017, 2018, and 2019 was $460,000. The tax rate for all years is 30%. Assume that it is more likely than not that the entire tax loss carry-forward will not be realized in future years. Assume that Kyle earns taxable income of $25,000 in 2021 and that at the end of 2021 there is still too much uncertainty to recognize a deferred tax asset.

Required -

1. Prepare the journal entries that are necessary at the end of 2021 assuming that Kyle does not use a valuation allowance account.

2. Prepare the journal entries that are necessary at the end of 2021 assuming that Kyle does use a valuation allowance account.

Reference no: EM132514776

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