At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $125 million attributable to a temporary book- tax difference of $500 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $384 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2021 is $900 million and the tax rate is 25%. 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. 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. Complete this question by entering your answers in the tabs below. Required 1 Required 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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) View journal entry worksheet (X) View transaction list No Event General Journal Debit Credit 1 1 Income tax expense 254 Deferred tax asset 29 Income taxes payable 225 Income tax expense Valuation allowance < Required 1 Required 2
At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $125 million attributable to a temporary book- tax difference of $500 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $384 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2021 is $900 million and the tax rate is 25%. 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. 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. Complete this question by entering your answers in the tabs below. Required 1 Required 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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) View journal entry worksheet (X) View transaction list No Event General Journal Debit Credit 1 1 Income tax expense 254 Deferred tax asset 29 Income taxes payable 225 Income tax expense Valuation allowance < Required 1 Required 2
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $125 million attributable to a temporary book-
tax difference of $500 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $384 million. Payne
has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2021 is $900 million and
the tax rate is 25%.
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.
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.
Complete this question by entering your answers in the tabs below.
Required 1
Required 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. (If no entry is required for a transaction/event, select "No journal entry required" in the
first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)
View transaction list
View journal entry worksheet
No
Event
General Journal
Debit
Credit
1
1
Income tax expense
254
Deferred tax asset
29
Income taxes payable
225
2
2
Income tax expense
Valuation allowance
< Required 1
Required 2 >
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