Use the information for Kyle Inc. given in BE18-14, but assume instead that it is more likely
Question:
Use the information for Kyle Inc. given in BE18-14, but assume instead that it is more likely than not that the entire tax loss carry forward will not be realized in future years. Prepare all the journal entries that are necessary at the end of 2014 assuming
(a) That Kyle does not use a valuation allowance account, and
(b) That Kyle does use a valuation allowance account.
Data From BE18-14
Kyle Inc. incurred a net operating loss of $580,000 in 2014. Combined income for 2011, 2012, and 2013 was $460,000. The tax rate for all years is 35%. Prepare the journal entries to record the benefits of the carryback and the carryforward, assuming it is more likely than not that the benefits of the loss carryforward will be realized.
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