Question

Prepare the journal entry(s) to record Payne's income taxes for 2013, assuming it is more likely than not that one-half of the deferred tax asset will ultimately be realized.

Option 1:
Debit: Income Tax Expense $36 million
Credit: Deferred Tax Asset $36 million

Option 2:
Debit: Income Tax Expense $35 million
Credit: Deferred Tax Asset $35 million

Option 3:
Debit: Income Tax Expense $14 million
Credit: Deferred Tax Asset $14 million

Option 4:
Debit: Income Tax Expense $20 million
Credit: Deferred Tax Asset $20 million

Answer 1

To record Payne's income taxes for 2013, assuming it is more likely than not that one-half of the deferred tax asset will ultimately be realized, we should use Option 1: Debit: Income Tax Expense $36 million and Credit: Deferred Tax Asset $36 million. Option 1.

Step-by-step explanation:

To record Payne's income taxes for 2013, assuming it is more likely than not that one-half of the deferred tax asset will ultimately be realized, we should use Option 1: Debit: Income Tax Expense $36 million and Credit: Deferred Tax Asset $36 million.

This journal entry reflects the recognition of income tax expense of $36 million, indicating the amount of taxes payable by Payne in 2013. The credit to Deferred Tax Asset represents the portion of the tax benefit that is expected to be realized in the future.