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At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $35 million attributable to a temporary book- tax difference of $140 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $96 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2021 is $252 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 in full. 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.

At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $35 million attributable to a temporary book- tax difference of $140 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $96 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2021 is $252 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 in full. 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.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $35 million attributable to a temporary book- tax difference of $140 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $96 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2021 is $252 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 in full. 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 No 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 in full. (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).) 1 2 Required 2 Transaction 1 2 Income tax expense Deferred tax asset Income tax payable X Answer is not complete. Income tax expense Valuation allowance General Journal X Debit 74 14 x Credit 11 63 14 x
Transcribed Image Text:At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $35 million attributable to a temporary book- tax difference of $140 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $96 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2021 is $252 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 in full. 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 No 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 in full. (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).) 1 2 Required 2 Transaction 1 2 Income tax expense Deferred tax asset Income tax payable X Answer is not complete. Income tax expense Valuation allowance General Journal X Debit 74 14 x Credit 11 63 14 x
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