At the end of 2017, Payne Industries had a deferred tax asset account with a balance of $30 million attributableto a temporary book-tax difference of $75 million in a liability for estimated expenses. At the end of 2018, thetemporary difference is $70 million. Payne has no other temporary differences. Taxable income for 2018 is $180million and the tax rate is 40%.Payne has a valuation allowance of $10 million for the deferred tax asset at the beginning of 2018.Required:1. Prepare the journal entry(s) to record Payne’s income taxes for 2018, assuming it is more likely than not thatthe 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 thatone-fourth of the deferred tax asset will ultimately be realized.
At the end of 2017, Payne Industries had a
to a temporary book-tax difference of $75 million in a liability for estimated expenses. At the end of 2018, the
temporary difference is $70 million. Payne has no other temporary differences. Taxable income for 2018 is $180
million and the tax rate is 40%.
Payne has a valuation allowance of $10 million for the deferred tax asset at the beginning of 2018.
Required:
1. Prepare the
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.
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