Lafayette, Incorporated, Completed Its First Year of Operations with a Pretax

question 122

Essay

Lafayette, Incorporated, completed its first year of operations with a pretax loss of $800,000. The tax return showed a net operating loss of $750,000. The $50,000 book-tax difference results from a disallowed deduction forbusiness-related meals. Management has determined that they should record a valuation allowance equal to the net deferred tax asset. Prepare the journal entries to record the deferred tax provision and the valuation allowance.

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Definitions:

Psychoanalysis

A therapeutic technique and theory of psychotherapy developed by Sigmund Freud, focusing on unconscious processes as they are manifested in an individual's behavior.

Observable Behavior

Actions or reactions that are visible and measurable, often used in the study of psychology to objectively assess and analyze behavior.

Reinforcement

A process in psychology used to encourage or strengthen a particular behavior by providing a reward or removing an unfavorable outcome.

Socially Acceptable

Behaviors, actions, or standards that are widely regarded by society as appropriate, proper, and fitting within societal norms and values.