BAM Inc. had a pretax loss of $300,000 in its first year of operations which resulted in a net operating loss of $400,000 for tax purposes due to $100,000 of excess tax depreciation over book depreciation. Management determined a valuation allowance equal to the net deferred tax asset should be recorded since the company had a loss, so journal entries need to be made to record the deferred tax provision at a 34% tax rate and the valuation allowance.

1. Problem2) BAM, Inc. completed its first year of operations with a pretax loss of $300,000. The
tax return showed a net operating loss of $400,000, which BAM will carryforward. The
$100,000 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. Assuming a tax rate of 34%, prepare the journal entries to record the deferred
tax provision and the valuation allowance.