Problem:
Htech Corp. started its operation in 2010 and has a $550,000 net operating loss when the tax rate is 35%. In 2011, the company has $680,000 taxable income and the tax rate is revised to 40% in early 2011.
Required:
Question 1: What are the entries in 2010 to record the tax loss carry-forward?(Assuming that it is more likely than not that half of the loss carry-forward will not be realized)
Question 2: What entries would be made to record income tax expenses in 2011?
Note: Be sure to show how you arrived at your answer.