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Ace_AZ Ace_AZ
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5 years ago
Violet Corporation reported a loss in 2015 of $650,000. The company reported taxable income of $195,000 in 2013 and $245,000 in 2014. It has no permanent or temporary differences and its tax rate is 20%.

Refer to Violet Corporation. Violet reported taxable income of $345,000 in 2016. What is the necessary journal entry for 2016?

A)
Income Tax Refund Receivable88,000
Deferred Tax Asset42,000
         Income Tax Benefit130,000

B)
Income Tax Refund Receivable27,000
Deferred Tax Asset42,000
         Income Tax Benefit69,000

C)
Income Tax Expense130,000
         Income Tax Payable88,000
         Deferred Tax Asset42,000

D)
Income Tax Expense69,000
         Income Tax Payable27,000
         Deferred Tax Asset42,000
Textbook 
Intermediate Accounting

Intermediate Accounting


Edition: 1st
Authors:
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jmarcjmarc
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5 years ago
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 D
Explanation:  Income Tax Expense for 2016 is the taxable income times the tax rate: 345,000  20%.

The NOL from 2015 is carried back 2 years, with the remaining balance carried forward to 2016.

Income Tax Payable is Income Tax Expense less the remaining NOL times the tax rate:
 (345,000 - 210,000)  20%.
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