1. Assume the following information for this problem only. In the year 2011, A&A Products had a net operating loss of $50,000 and a tax rate of 20%. In 2010, A&A Products had income of $10,000 and a tax rate of 20%. In 2012, A&A Products reported net income of $70,000 and a tax rate of 20%.
Prepare the entry that A&A Products should have made in 2011. Prepare an entry for 2012 showing the effect on the net operating loss from 2011 on A&A Products' books.