Correct solution please Recording a Deferred Tax AllowanceAllied Corp. has a deferred tax asset balance of $200,000 on December 31 due to a temporary difference related to a warranty expense accrual that is not deductible for tax purposes. The deferretax asset balance has increased $40,000 over the prior year ending balance of $160,000. Taxable income for the year is $840,000 and the tax rate is 25%. There was no deferred tax asset valuationallowance recorded on January 1.Requireda. Record the income tax journal entries on December 31 to (1) adjust the deferred tax asset account and (2) adjust the deferred tax asset valuation allowance, assuming that it is more likely thannot that the deferred tax asset ending balance of $200,000 will be realized.• Note: If a journal entry isn't required on any of the dates shown, select "N/A-debit" and "N/A-credit" as the account names and leave the Dr. and Cr. answers blank (zero)Date1. Dec. 31Date2. Dec. 31Account NameIncome Tax ExpenseDeferred Tax AssetIncome Tax PayableTo adjust deferred tax asset balanceN/A - DebitAccount NameN/A - CreditTo adjust deferred tax valuation allowance.wليةDr.170,00040,000Dr.000Cr.0✔0210,000 ✓Cr.0✔0b. Record the income tax journal entries on December 31 to (1) adjust the deferred tax asset account and (2) adjust the deferred tax asset valuation allowance, assuming that it is more likely thannot that only 60% of the deferred tax asset ending balance of $200,000 will be realized.• Note: If a journal entry isn't required on any of the dates shown, select "N/A-debit" and "N/A-credit" as the account names and leave the Dr. and Cr. answers blank (zero) b. Record the income tax journal entries on December 31 to (1) adjust the deferred tax asset account and (2) adjust the deferred tax asset valuation allowance, assuming that it is more likely thannot that only 60% of the deferred tax asset ending balance of $200,000 will be realized.• Note: If a journal entry isn't required on any of the dates shown, select "N/A-debit" and "N/A-credit" as the account names and leave the Dr. and Cr. answers blank (zero)Date1. Dec. 31Date2. Dec. 31Account NameIncome Tax ExpenseDeferred Tax AssetIncome Tax PayableTo adjust deferred tax asset balanceAccount NameValuation Allowance for Deferred Tax AssetIncome Tax ExpenseTo adjust deferred tax valuation allowanceDr.170,00040,0000Dr.210,0000Cr.00210,000Cr.0x40,000 X

Tax liability refers to the actual amount due to the revenue collection authority by the income…

Recording a Deferred Tax Allowance Allied Corp. has a deferred tax asset balance of $200,000 on December 31 due to a temporary difference related to a warranty expense accrual that is not deductible for tax purposes. The deferre tax asset balance has increased $40,000 over the prior year ending balance of $160,000. Taxable income for the year is $840,000 and the tax rate is 25%. There was no deferred tax asset valuation allowance recorded on January 1. Required a. Record the income tax journal entries on December 31 to (1) adjust the deferred tax asset account and (2) adjust the deferred tax asset valuation allowance, assuming that it is more likely than not that the deferred tax asset ending balance of $200,000 will be realized. Note: If a journal entry isn't required on any of the dates shown, select "N/A-debit" and "N/A-credit" as the account names and leave the Dr. and Cr. answers blank (zero) Date 1. Dec. 31 Date 2. Dec. 31 Account Name Income Tax Expense Deferred Tax Asset Income Tax Payable To adjust deferred tax asset balance N/A-Debit Account Name N/A - Credit To adjust deferred tax valuation allowance. Dr. 170,000 40,000 0 Dr. 0 0 Cr. 0 210,000 ✓ Cr. 0✔ b. Record the income tax journal entries on December 31 to (1) adjust the deferred tax asset account and (2) adjust the deferred tax asset valuation allowance, assuming that it is more likely than not that only 60% of the deferred tax asset ending balance of $200,000 will be realized. • Note: If a journal entry isn't required on any of the dates shown, select "N/A-debit" and "N/A-credit" as the account names and leave the Dr. and Cr. answers blank (zero)

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q