Recording a Deferred Tax Allowance Allied Corp. has a deferred tax asset balance of $50,000 on December 31 due to a temporary difference related to a warranty expense accrual that is not deductible for tax purposes. The deferred tax asset balance has increased $10,000 over the prior year ending balance of $40,000. Taxable income for the year is $210,000 and the tax rate is 25%. There is a deferred tax asset valuation allowance credit balance of $12,000 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 $50,000 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 Date 1. Dec. 31 Date 2. Dec. 31 Account Name Chach Deferred Tax Asset Income Tax Expense Income Tax Payable To adjust deferred tax asset balance Account Name Valuation Allowance for Deferred Tax Asset Income Tax Expense To adjust deferred tax valuation allowance. Account Name Deferred Tax Asset Income Tax Expense Income Tax Payable To adjust deferred tax asset balance V Account Name Valuation Allowance for Deferred Tax Asset Income Tax Expense To adjust deferred tax valuation allowance. 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 nor that only 60% of the deferred tax asset ending balance of $50,000 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) V Dr. V V 10,000 42,500 0 Dr. 12,000 0 Dr. 10,000 42,500 0 Dr. Cr. 8,000 0 0 0 52.500 Cr. 12.000 05 Cr. Cr. 0 0✔ 52,500 0x 8,000 x
Recording a Deferred Tax Allowance Allied Corp. has a deferred tax asset balance of $50,000 on December 31 due to a temporary difference related to a warranty expense accrual that is not deductible for tax purposes. The deferred tax asset balance has increased $10,000 over the prior year ending balance of $40,000. Taxable income for the year is $210,000 and the tax rate is 25%. There is a deferred tax asset valuation allowance credit balance of $12,000 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 $50,000 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 Date 1. Dec. 31 Date 2. Dec. 31 Account Name Chach Deferred Tax Asset Income Tax Expense Income Tax Payable To adjust deferred tax asset balance Account Name Valuation Allowance for Deferred Tax Asset Income Tax Expense To adjust deferred tax valuation allowance. Account Name Deferred Tax Asset Income Tax Expense Income Tax Payable To adjust deferred tax asset balance V Account Name Valuation Allowance for Deferred Tax Asset Income Tax Expense To adjust deferred tax valuation allowance. 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 nor that only 60% of the deferred tax asset ending balance of $50,000 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) V Dr. V V 10,000 42,500 0 Dr. 12,000 0 Dr. 10,000 42,500 0 Dr. Cr. 8,000 0 0 0 52.500 Cr. 12.000 05 Cr. Cr. 0 0✔ 52,500 0x 8,000 x
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Recording a Deferred Tax Allowance
Allied Corp. has a deferred tax asset balance of $50,000 on December 31 due to a temporary difference related to a warranty expense accrual that is not deductible for tax purposes. The deferred tax asset balance has increased $10,000 over the prior year ending balance of $40,000.
Taxable income for the year is $210,000 and the tax rate is 25%. There is a deferred tax asset valuation allowance credit balance of $12,000 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 $50,000 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
Date
2. Dec. 31
Deferred Tax Asset
Income Tax Expense
Check
Income Tax Payable
To adjust deferred tax asset balance
Account Name
Valuation Allowance for Deferred Tax Asset
Income Tax Expense
To adjust deferred tax valuation allowance.
Date
1. Dec. 31 Deferred Tax Asset
Income Tax Expense
Account Name
Income Tax Payable
To adjust deferred tax asset balance.
Account Name
Valuation Allowance for Deferred Tax Asset
v
Income Tax Expense
To adjust deferred tax valuation allowance.
Dr.
10,000
42,500
0
Dr.
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 $50,000 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)
12,000
0
Dr.
10,000
42,500
0
Dr.
Cr.
8,000
0
52,500
Cr.
0✔
0✔
0✓
12,000✔
Cr.
0✔
0
52,500✔
Cr.
0x
8,000 x](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb37f5f3f-60f0-49bc-a26d-ab9a7e83ee02%2F863a587a-2999-45bd-b67f-1727a248af02%2F5vvn1rn_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Recording a Deferred Tax Allowance
Allied Corp. has a deferred tax asset balance of $50,000 on December 31 due to a temporary difference related to a warranty expense accrual that is not deductible for tax purposes. The deferred tax asset balance has increased $10,000 over the prior year ending balance of $40,000.
Taxable income for the year is $210,000 and the tax rate is 25%. There is a deferred tax asset valuation allowance credit balance of $12,000 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 $50,000 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
Date
2. Dec. 31
Deferred Tax Asset
Income Tax Expense
Check
Income Tax Payable
To adjust deferred tax asset balance
Account Name
Valuation Allowance for Deferred Tax Asset
Income Tax Expense
To adjust deferred tax valuation allowance.
Date
1. Dec. 31 Deferred Tax Asset
Income Tax Expense
Account Name
Income Tax Payable
To adjust deferred tax asset balance.
Account Name
Valuation Allowance for Deferred Tax Asset
v
Income Tax Expense
To adjust deferred tax valuation allowance.
Dr.
10,000
42,500
0
Dr.
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 $50,000 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)
12,000
0
Dr.
10,000
42,500
0
Dr.
Cr.
8,000
0
52,500
Cr.
0✔
0✔
0✓
12,000✔
Cr.
0✔
0
52,500✔
Cr.
0x
8,000 x
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