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.

Shwonson Industries reported a deferred tax asset of $9.75 million for the year ended December 31, 2020, related to a temporary difference of $39 million. The tax rate was 25%. The temporary difference is expected to reverse in 2022, at which time the deferred tax asset will reduce taxable income. There are no other temporary differences in 2020–2022. Assume a new tax law is enacted in 2021 that causes the tax rate to change from 25% to 15% beginning in 2022. (The rate remains 25% for 2021 taxes.) Taxable income in 2021 is $49 million. Required:1. Prepare the appropriate journal entry to record Shwonson’s income tax expense in 2021.2. What effect, will enacting the change in the 2022 tax rate, have on Shwonson’s 2021 net income?

Sherrod, Inc., reported pretax accounting income of $70 million for 2021. The following information relates to differences between pretax accounting income and taxable income: Income from installment sales of properties included in pretax accounting income in 2021 exceeded that reported for tax purposes by $4 million. The installment receivable account at year-end 2021 had a balance of $6 million (representing portions of 2020 and 2021 installment sales), expected to be collected equally in 2022 and 2023. Sherrod was assessed a penalty of $1 million by the Environmental Protection Agency for violation of a federal law in 2021. The fine is to be paid in equal amounts in 2021 and 2022. Sherrod rents its operating facilities but owns one asset acquired in 2020 at a cost of $60 million. Depreciation is reported by the straight-line method, assuming a four-year useful life. On the tax return, deductions for depreciation will be more than straight-line depreciation the first two years but…

At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $125 million attributable to a temporary book-tax difference of $500 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $384 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2021 is $900 million and the tax rate is 25%. Required:1. Prepare the journal entry(s) to record Payne’s income taxes for 2021, 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 2021, assuming it is more likely than not that only one-fourth of the deferred tax asset ultimately will be realized.