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Exercise 16-12 (Algo) Deferred tax asset; taxable income given; valuation allowance [LO16-4] At the end of 2023, Payne Industries had a deferred tax asset account
Exercise 16-12 (Algo) Deferred tax asset; taxable income given; valuation allowance [LO16-4]
At the end of 2023, Payne Industries had a deferred tax asset account with a balance of $90 million attributable to a temporary book-tax difference of $360 million in a liability for estimated expenses. At the end of 2024, the temporary difference is $272 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2024 is $648 million and the tax rate is 25%.
Required:
- Prepare the journal entry(s) to record Paynes income taxes for 2024, assuming it is more likely than not that the deferred tax asset will be realized in full.
- Prepare the journal entry(s) to record Paynes income taxes for 2024, assuming it is more likely than not that only one-fourth of the deferred tax asset ultimately will be realized.
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