In 2021, its first year of operations, Gimble Corp. has a $900,000 net operating loss when the tax rate is 20%. In 2022, Gimble has $250,000 taxable income and the tax rate remains 20%. Required Assume the management of Gimble Corp. thinks that it is more likely than not that the loss carryforward will not be realized in the near future because it is a new company.

(a) What are the entries in 2021 to record the tax effects of the loss carryforward?

(b) What entries would be made in 2022 to record the current and deferred income taxes and to recognize the loss carryforward?

(Assume that at the end of 2022 it is more likely than not that the deferred tax asset will be realized.)

Answer rating: 100% (QA)

Date Account Titles Debit Credit 2021 Deferred Tax Asset 90000020 180000 Benefit ... View the full answer