GinnyCo has pretax book and taxable income of $400,000 and reports a $100,000 income tax payable in the current year. GinnyCo has engaged in activities that it believes qualify for the research activities credit a general business tax credit of $40,000 that it cannot use this year, and its management believes that it is more likely than not that one-fourth of the credit carryforward will expire unused.

a. Compute GinnyCo's income tax provision for the year, expressed as a Microsoft Excel formula.

TAXPROV=TAX PAY-(MAX(DEFTAX,(DEFTAX-VALALL))TAXPROV=TAX PAY-(MAX(VALALL,(DEFTAX-VALALL))TAXPROV=TAX PAY-(MIN(DEFTAX,(DEFTAX-VALALL))TAXPROV=TAX PAY-(MIN(VALALL,(DEFTAX-VALALL))TAXPROV=TAX PAY-(MIN(DEFTAX,(DEFTAX-VALALL))

DEFTAX=VALALL∗UNUSED%DEFTAX=VALALL∕UNUSED%VALALL=DEFTAX∗UNUSED%VALALL=DEFTAX∕UNUSED%VALALL=DEFTAX∗UNUSED%

 

b. Construct the journal entry to report these items. JOURNAL Post. DATE Description Debit Credit Ref. Deferred tax liabilitylncome tax expense fill in the (provision)income tax payablevaluation allowancelncome tax expense (provision) blank 4 fill in the Deferred tax assetDeferred tax liabilityincome tax payableValuation allowanceDeferred tax asset blank 6 Deferred tax assetlincome tax expenselncome tax fill in the expense (provision)Valuation allowanceValuation blank 8 allowance Deferred tax assetDeferred tax liabilitylncome tax fill in the expenselncome tax payablelncome tax payable blank 10