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In posting to the income statement, how would I handle the entry that states (loss from expropriation of overseas plant (net of $1,200,000 of tax benefit)? The amount of 1,000,000 was given for the plant.


Expert Donna Atkins's Answer:

 Your question is not entirely clear, but if I am to assume the tax benefit is 1.2M and the net loss is $1M, then the total loss is probably $2.2M.  In this case you really need to remove the asset from the books (the overseas plant, depreciation, ect).... an entry to record this might be as follows:


Property, Plant & equipment    Credit to remove from books

Depreciation on PP&E               Debit to remove from books


Deferred Tax benefit       Credit for 1.2M

Loss on Expropriated Assets  Debit for 2.2M

Removal of Net PP&E from above Credit for 2.2M

Deferred Tax Asset     Debit for 1.2M


You may also need a valuation allowance for the tax asset benefit if the loss will not be utilized in the future.

Donna Atkins, CPA

New Hampshire

21 yrs experience

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