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Mabilises and efter Example 1: Valuation allowance considerations Foreman Industries, Inc. reported the following information on the compan ported the following information on the company's trial balance for 2015: Pretax book income, $50,000 Deferred tax asset, $21,700 Revenue from installment sales. $300.000. Foreman records revenue are sold (i.e., accrual method), and customers issue payment in quan generally over a one-year period. 12/31/2014 12/31/2015 $0 $295,000 Installment sales receivable - book basis Installment sales receivable - tax basis The tax workpapers show the following information relevant for ASC 740: For tax purposes, taxable income is generated under the typical rules for revenue recognition (i.e., the earliest of when revenue is earned, due, received or recognized). Cash collected on installment sales during 2015, $5,000. NOL carry forward from a prior year of $62,000. The company plans to carryforward any current and future NOLs. Though the company reported a net loss on its 2014 tax return, the company's first year of operations (which resulted in the NOL), management expects to have positive taxable income in future years with income growth about 10% per year. The U.S. statutory tax rate is 35%. 1. What is the company's taxable income for 2015? 2. Complete the cumulative difference template below for Foreman's temporary differences. Beg. Cumulative T/D Temporary Differences NOL Beg. Deferred taxes End Cumulative T/D Current Year Change End Deferred Taxes Installment sales receivable Example 1: Valuation allowance considerations (continued) 3. What journal entries are necessary to account for the company's 2015 income tax provision? 4. Should the company record a valuation allowance against its DTA? Provide support for why a VA is or is not necessary. Mabilises and efter Example 1: Valuation allowance considerations Foreman Industries, Inc. reported the following information on the compan ported the following information on the company's trial balance for 2015: Pretax book income, $50,000 Deferred tax asset, $21,700 Revenue from installment sales. $300.000. Foreman records revenue are sold (i.e., accrual method), and customers issue payment in quan generally over a one-year period. 12/31/2014 12/31/2015 $0 $295,000 Installment sales receivable - book basis Installment sales receivable - tax basis The tax workpapers show the following information relevant for ASC 740: For tax purposes, taxable income is generated under the typical rules for revenue recognition (i.e., the earliest of when revenue is earned, due, received or recognized). Cash collected on installment sales during 2015, $5,000. NOL carry forward from a prior year of $62,000. The company plans to carryforward any current and future NOLs. Though the company reported a net loss on its 2014 tax return, the company's first year of operations (which resulted in the NOL), management expects to have positive taxable income in future years with income growth about 10% per year. The U.S. statutory tax rate is 35%. 1. What is the company's taxable income for 2015? 2. Complete the cumulative difference template below for Foreman's temporary differences. Beg. Cumulative T/D Temporary Differences NOL Beg. Deferred taxes End Cumulative T/D Current Year Change End Deferred Taxes Installment sales receivable Example 1: Valuation allowance considerations (continued) 3. What journal entries are necessary to account for the company's 2015 income tax provision? 4. Should the company record a valuation allowance against its DTA? Provide support for why a VA is or is not necessary