At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $45 million attributable to a temporary book-tax difference of $180 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $128 million. Payne has no other temporary differences. Taxable income for 2021 is $324 million and the tax rate is 25%. Payne has a valuation allowance of $18 million for the deferred tax asset at the beginning of 2021. Required: 1. Prepare the journal entry(s) to record Paynes 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 Paynes income taxes for 2021, assuming it is more likely than not that only one-fourth of the deferred tax asset ultimately will be realized.

Journal entries should be one of the following:

No journal entry required

Accumulated depreciation

Cash

Deferred tax asset

Deferred tax liability

Depreciation expense

Equipment

Income tax expense

Income tax payable

Insurance expense

Interest expense

Interest payable

Inventory

Prepaid insurance

Retained earnings

Valuation allowance

Journal entry worksheet

Record 2021 income taxes.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
1

Journal entry worksheet

Record valuation allowance for the end of 2021.

Note: Enter debits before credits.

Transaction	General Journal	Debit	Credit
2