Question

At the end of 2020, Payne Industries had a deferred tax asset account with a balance of $25 million attributable to a temporary book-tax difference of $100 million in a liability for estimated expenses. At the end of 2021, the temporary difference is $64 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2021 is $180 million and the tax rate is 25%. Required: 1. Prepare the journal entry(s) to record Payne’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 Payne’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.

Answer 1

Check the explanation

Step-by-step explanation:

going by the question above, we can calculate the below figures.

deferred tax asset at the beginning of year 2021 = $25 million

deferred tax asset at the end of year 2021 = $24 X 25% = $16 million

so the differed that asset for the year will be = $16 million - $25 million

= - $9million

The complete step by step solution can be seen in the attached images below.