MAC,IncCompleted Its First Year of Operations with a Pretax Loss

question 32

Essay

MAC,Inc.completed its first year of operations with a pretax loss of $300,000.The tax return showed a net operating loss of $500,000,which MAC will carryforward.The $200,000 book-tax difference results from excess tax depreciation over book depreciation.Management has determined that they should record a valuation allowance equal to the net deferred tax asset.Assuming a tax rate of 34%,prepare the journal entries to record the deferred tax provision and the valuation allowance.

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Definitions:

Paid Time Off

A workplace policy where employees are provided with a certain amount of days for which they are paid while being allowed to take time off from work.

Medical Practice

The professional and ethical conduct, alongside the activities and services provided by doctors and health care professionals to maintain and restore health.

Relocating

The process of moving from one place to another, which can involve changing residence, business location, or the site of a specific activity.

W-2 Form

A tax form issued by employers in the United States to report an employee's annual wages and the amount of taxes withheld from their paycheck.