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In its first three years of operations Carlos Productions, a musical production company, reported the following operating income (loss) amounts: 2019 $ 450,000 2020 (1,000,000 ) 2021 1,800,000 There were no other deferred income tax amounts in any year. The enacted income tax rate was 25% in 2020 and 30% thereafter. In its 2020 balance sheet, what amount of deferred tax asset should Carlos report relevant to the NOL? (It concludes that no valuation allowance is necessary.)

Respuesta :

tanseershar

Answer:

Explanation:

                                      Temporary Difference

2020 Loss                    $(1,000,000)*25%=$250,000

The $250,000 is deductible temporary difference and will be recorded as

   Deferred Tax Asset Dr.$250,000

   Deferred Tax Income  Cr.$250,000

It is given in question that company has $1.8 million profits in 2021, therefore in such case deferred tax asset is recorded as there is certain that company will have profits in future.

anthougo

The amount of deferred tax asset that Carlos Productions should report with regard to its Net Operating Loss (NOL) is $1,000,000.

The Net Operating Loss is a carry-forward loss which Carlos can deduct from future profits, provided it does not exceed 80% of its taxable income.

Data and Calculations:

                                                2019         2020               2021

Operating income (loss) $ 450,000 (1,000,000)     1,800,000

Income tax rate                                         25%                30%

The amount of deferred tax asset in 2020 = $1,000,000

Thus, Carlos Productions can record $1,000,000 as deferred tax asset in 2020 because it can recover this amount from future profits.

Learn more: https://brainly.com/question/18524044

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