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

Essay

MAC, Incorporated, completed its first year of operations with a pretax loss of $300,000. The tax return showed a net operating loss of $500,000. 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. Prepare the journal entries to record the deferred tax provision and the valuation allowance.