Lafayette, Incorporated, completed its first year of operations with a pretax loss of $808,000. The tax return showed a net operating loss of $766,000. The $42,000 book-tax difference results from a disallowed deduction for business-related meals. 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.

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The Answer of Lafayette, Incorporated, completed its first year of operations with a pretax loss of $808,000. The tax return showed a net operating loss of $766,000. The $42,000 book-tax difference results from a disallowed deduction for business-related meals. 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.

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