Question

Exercise 16-10 Deferred tax asset; taxable income given; valuation allowance (L016-3] At the end of 2017, Payne Industries had a deferred tax asset account with a balance of $34 million attributable to a temporary book- tax difference of $85 million in a liability for estimated expenses. At the end of 2018, the temporary difference is $80 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2018 is $185 million and the tax rate is 40%. Required: 1. Prepare the journal entry(s) to record Payne's income taxes for 2018, assuming it is more likely than not that the deferred tax asset will be realized. 2. Prepare the journal entry(s) to record Payne's income taxes for 2018, assuming it is more likely than not that one-fourth of the deferred tax asset will ultimately be realized. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare the journal entry(s) to record Payne's income taxes for 2018, assuming it is more likely than not that the deferred tax asset will be realized. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) View transaction list Journal entry worksheet Record 2018 income taxes.

Answer 1

O sowtion Dute Account title & Explanation Delit Gredit 76 Income Tax expense [185 +5x40% Deferred Tax asset [ 5x4066] Income Tax payable [ 185 x 40%] [To record payne's Income Taxes 2018] No Journal entry required [Because it is estimated that deferred tax asset will be realized] Date Hon Account title & Debit i Gedit 76 Income Tax expense [185 ts] x 40% Deferred Tax Asset [ 5x 40 %] Income Tax payable { 185 x 40% ] 74 [ To record payne's Income taxes 2018] Income Tax expense [ 80 x40 /1/4x3] 24 Valuation allowance - Deferred Tax assett TC To encosd the valuation allowance ]