Accounting & the 3 Statements
Walk through how a $100 pre-tax NOL is created in Year 1 and used in Year 2 across the three statements (21% tax rate, realization probable).
Model answer
Year 1 (creation): $100 pre-tax loss. Books record a tax BENEFIT of $21 ($100 × 21%) and create a $21 DTA, so net loss = −$79. CFS: start at −$79, then SUBTRACT the $21 DTA increase (non-cash…
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