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In 2017, its first year of operations, Guernsey Inc. reported a $200,000 loss for tax purposes. However, in 2018, Guernsey reported $250,000 taxable...
In 2017, its first year of operations, Guernsey Inc. reported a $200,000 loss for tax purposes. However, in 2018, Guernsey reported $250,000 taxable income. The tax rate is 20%, and is likely to remain at this rate for the foreseeable future. Guernsey is a private corporation reporting under ASPE.
Assume Guernsey's management thinks, at the end of 2017, that it is likely that the loss carryforward will not be realized in the near future. Guernsey chooses to use the valuation allowance method for loss carryforwards.
Instructions
a) What entries (if any) would be prepared in 2017 to record the loss carryforward?
b) What entries (if any) would be prepared in 2018 to record the current and future income taxes and to recognize the loss carryforward?
