Sage Corp. has a deferred tax asset account with a balance of $72,400 at the end of 2019 due to a single cumulative temporary difference of $362,000. At the end of 2020, this same temporary difference has increased to a cumulative amount of $440,000. Taxable income for 2020 is $843,000. The tax rate is 20% for all years. No valuation account related to the deferred tax asset is in existence at the end of 2019. (a) Record income tax expense, deferred income taxes, and income taxes payable for 2020, assuming that it is more likely than not that the deferred tax asset will be realized. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Income Tax Expense Income Tax Payable Debit Credit (b) Assuming that it is more likely than not that $15,600 of the deferred tax asset will not be realized, prepare the journal entry at the end of 2020 to record the valuation account. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Sage Corp. has a deferred tax asset account with a balance of $72,400 at the end of 2019 due to a single cumulative temporary difference of $362,000. At the end of 2020, this same temporary difference has increased to a cumulative amount of $440,000. Taxable income for 2020 is $843,000. The tax rate is 20% for all years. No valuation account related to the deferred tax asset is in existence at the end of 2019. (a) Record income tax expense, deferred income taxes, and income taxes payable for 2020, assuming that it is more likely than not that the deferred tax asset will be realized. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Income Tax Expense Income Tax Payable Debit Credit (b) Assuming that it is more likely than not that $15,600 of the deferred tax asset will not be realized, prepare the journal entry at the end of 2020 to record the valuation account. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Sage Corp. has a deferred tax asset account with a balance of $72,400 at the end of 2019 due to a single cumulative
temporary difference of $362,000. At the end of 2020, this same temporary difference has increased to a cumulative amount
of $440,000. Taxable income for 2020 is $843,000. The tax rate is 20% for all years. No valuation account related to the
deferred tax asset is in existence at the end of 2019.
(a) Record income tax expense, deferred income taxes, and income taxes payable for 2020, assuming that it is more likely
than not that the deferred tax asset will be realized. (Credit account titles are automatically indented when amount
is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O
for the amounts.)
Account Titles and Explanation
Income Tax Expense
Income Tax Payable
Debit
Account Titles and Explanation
(b) Assuming that it is more likely than not that $15,600 of the deferred tax asset will not be realized, prepare the journal
entry at the end of 2020 to record the valuation account. (Credit account titles are automatically indented when
amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and
enter 0 for the amounts.)
Credit
Debit
Credit
||
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