Question: Valuation Allowance, Disclosure. Use the same information provided in E17- 14. Now assume that in year 4, taxable income is $ 280,000. This amount is

Valuation Allowance, Disclosure. Use the same information provided in E17- 14. Now assume that in year 4, taxable income is $ 280,000. This amount is higher than anticipated by management€” and they now believe that they will be able to utilize the entire NOL carryforward.

Required
a. Prepare the journal entries needed to record Aurora€™s income tax provision for year 4.
b. Prepare the footnote, in dollars and percentages, required to reconcile the federal statutory income tax rate to the company€™s effective income tax rate.

Income (Loss) Year Before Tax $405,000 220,000 (975,000) Tax Rate 3496 3496 2496 2

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