Question

question 1 At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $95 million attributable to a temporary book-tax difference of $380 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $288 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2021 is $684 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 in full.
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.

a.

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 in full. (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).)

B.

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. (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).)

  

Four independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences: ($ in thousands) Situation 1 2 3 4 $148 $ 280 $324 $452 16 20 20 16 16 92 Taxable income Future deductible amounts Future taxable amounts Balance(s) at beginning of the year: Deferred tax asset Deferred tax liability 2 4 25 2 8 The enacted tax rate is 25%. Required: For each situation, determine the following: (Enter your answers in thousands rounded to one decimal place (i.e. 1,200 should be entered as 1.2). Negative amounts should be indicated by a minus sign. Leave no cell blank, enter "0" wherever applicable.) Situation 2 3 1 4 a. Income tax payable currently. b. Deferred tax asset-ending balance. c. Deferred tax asset-change. d. Deferred tax liability-ending balance. e. Deferred tax liability—change. f. Income tax expense.

Answer 1

Dear student, we cannot able to post solution more than one question as per our policy.

	Part A
Journal Entries
Event	Description	Post. Ref	Debit	Credit
1	Income tax expense		194.00
	Deferred tax assets ((380-288)*25%)			23.00
	Income tax payable (684*25%)			171.00
	To record income tax expense for current year
2	No journal entry would be required for valuation allowance
	Part B
Journal Entries
Event	Description	Post. Ref	Debit	Credit
1	Income tax expense		194.00
	Deferred tax assets ((380-288)*25%)			23.00
	Income tax payable (684*25%)			171.00
	To record income tax expense for current year
2	Income tax expense ((288*25%)*1/4)		18.00
	Valuation allowance - Deferred tax assets			18.00
	To record valuation allowance.