Question 5(6 pts.)

5.1 (3 pts.) On December 31, 2013, Winston Inc. has determined that it is more likely than not that $240,000 of a $600,000 deferred tax asset will not be realized. The journal entry to record this reduction in asset value will include a

A. debit to Income Tax Expense for $360,000.

B. credit to Allowance to Reduce Deferred Tax Asset to Expected Realizable Value of $240,000.

C. debit to Income Tax Payable of $240,000.

D. credit to Income Tax Expense for $360,000.

5.2 (3 pts.) Based on the information above indicate the balance sheet presentation of the relevant accounts (not the owners equity section):

Q6 (8 pts.)

Hawkins Inc. had pre-tax accounting income of $1,800,000 and a tax rate of 35% in 2013, its first year of operations. During 2013 the company had the following transactions:

Received rent from Barrett Co. for 2014 $64,000

Municipal bond income $80,000

Depreciation for tax purposes in excess of book depreciation $40,000

Installment sales revenue to be collected in 2014 $108,000

Prepare the journal entry for taxes:

Q7 (3 pts.) Pringle Corporation reported $200,000 in revenues in its 2012 financial statements, of which $88,000 will not be included in the tax return until 2013. The enacted tax rate is 40% for 2012 and 35% for 2013. What amount should Pringle report for deferred income tax (asset or liability) in its balance sheet at December 31, 2012?

	Amount	Or	Amount
DTA		DTL