Example #$4-$ Net Operating Losses

Times Hungry Corp. has had no permanent or temporary

differences since it began operations. Information regarding

taxable income and taxes paid is as follows:

The tax rate enacted for Year $6$ and subsequent years is $25\%.$

$($a$)$ Prepare the journal entry to record the expected benefits of

any related NOL carryforward. Assume it is likely that the

benefits of any carryforward will be fully realized.

$($b$)$ How are the accounts in the journal entries prepared in $($a$)$

to be reported in the financial statements for Year $5?$

$($c$)$ Assume taxable income is $$100,000($before considering

the NOL carryforward$)$ in Year $6.$ Prepare the journal entry

to record income taxes.