Question

On January 1, 2015, Toms River Rafting, Inc. (TRR), has a deferred tax asset representing $250,000 in net operating loss carryforwards on its balance sheet. When it recognized this asset, TRR expected to have sufficient earnings to utilize these loss carryforwards. However, TRR’s business has been very slow because of a severe drought and it determines at December 31, 2015, that it is likely the company will only be able to recover half of the net operating loss carryforward available at this date. TRR reported pre-tax book income of $100,000 and taxable income of $97,700 in 2015.
The difference between pre-tax book income and taxable income relates to one temporary difference for depreciation of property, plant, and equipment that originated in 2015. The enacted tax rate is 35%. The substantively enacted tax rate is 40%.

Required:
Prepare the journal entries to record tax expense in 2015 under both U.S. GAAP and IFRS.



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  • CreatedSeptember 10, 2014
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