Assume that last year (2011) ABC had a net operating loss of $50,000 and, ABC reported tax expense for 2012 of $70,000. Also assume that in 2010 ABC…

3.Assume that last year (2011) ABC had a net operating loss of $50,000 and, ABC reported tax expense for 2012 of $70,000. Also assume that in 2010 ABC had income of $10,000 and a tax rate of 20%. This year, 2012, ABC reported net income of $70,000 and a tax rate of 20%. Requirements:Prepare the entry that ABC should have made in 2011. Prepare any entry for 2012 recording the effect of the 2011 net operating loss on ABC’s books.

Prepare the entry that ABC should have made in 2011.In 2011 no entry has to be passed as there was lossPrepare any entry for 2012 recording the effect of the 2011 net operating loss on ABC’s…