Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $30 million attributable to a temporary book-tax difference

At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $30 million attributable to a temporary book-tax difference of $120 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $80 million. Payne has no other temporary differences. Taxable income for 2021 is $216 million and the tax rate is 25%. Payne has a valuation allowance of $12 million for the deferred tax asset at the beginning of 2021.

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.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Trucking Industry IRS Audit Techniques Guide

Authors: Internal Revenue Service

1st Edition

1304135640, 978-1304135643

More Books

Students also viewed these Accounting questions