Solution-Record the entry, Re do the 2005 entry only

Record the entry

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Reference no: EM132868487

Question - Carl Inc. started operations in 2006. The statements of comprehensive income for the first four years of operations reflected the following pre-tax amounts:

2004 = Pre-tax earnings (loss) 125,000

2005 = Pre-tax earnings (loss) (292,000)

2006 = Pre-tax earnings (loss)22,000

2007 = Pre-tax earnings (loss) 56,000

There are no temporary differences other than those created by income tax losses.

Carl Inc. has had a constant income tax rate of 35% for all four years.

A) Give the entries to record income tax expense for each year, assuming that management has assessed that use of the loss carryforwards is probable.

1. RECORD ENTRY FOR 2004

2. RECORD ENTRY FOR 2005

3. RECORD ENTEY FOR 2006

4. RECORD ENTRY FOR 2007

B) Re do the 2005 entry only assuming the loss carryforward is not probable.

1. Record the entry for 2005 if the loss carryforward was not probable.

Reference no: EM132868487

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Reference no: EM132868487

Reference no: EM132868487

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