In 2007, its first year of operations, Marcos Corp. has a $500,000 net operating loss when the tax rate is 30%. In 2008, Marcos has $200,000 taxable income and the tax rate remains at 30%.
Assume the management of Marcos Corp. thinks that it is more likely than not that the loss carryforward will not be realized because it is difficult to project future profitability (this is before results of 2008 operations are known). Marcos Corp. does not use the valuation allowance approach.
Required:
(a) What are the entries in 2007 to record the tax loss carryforward?
(b) What entries would be made in 2008 to record the current and future income taxes and to recognize the loss carryforward? (Assume that at the end of 2008 it is more likely than not that the future tax asset from the loss carryfoward will be realized.)
Use IFRS.