On December 31, 2020, Knight Industries had a deferred tax asset account with a balance of $65 million attributable to a temporary book-tax difference of $260 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $192 million. Knight has no other temporary differences. Taxable income for 2021 is $468 million and the tax rate is 25%. Payne has a valuation allowance of $26 million for the deferred tax asset at the beginning of 2021. Required: 1. Prepare the journal entry(s) to record Knight’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 Knight’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.
On December 31, 2020, Knight Industries had a
Payne has a valuation allowance of $26 million for the deferred tax asset at the beginning of 2021.
Required:
1. Prepare the
2. Prepare the journal entry(s) to record Knight’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.
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