A firm incurs a net operating loss of $250,000. Taxable income in the two preceding years amounted to $150,000 with a tax rate of 40%. Show the journal entry required to record this information. The firm has elected NOT to forego the loss carry-back option. Solution.

1. A firm incurs a net operating loss of $250,000. Taxable income in the two preceding years
amounted to $150,000 with a tax rate of 40%. Show the journal entry required to record this
information. The firm has elected NOT to forego the loss carry-back option.
Solution