Jennifer Capriati Corp. has a deferred tax asset account with a balance of $151,

Question

Jennifer Capriati Corp. has a deferred tax asset account with a balance of $151,100 at the end of 2013 due to a single cumulative temporary difference of $377,750. At the end of 2014, this same temporary difference has increased to a cumulative amount of $507,600. Taxable income for 2014 is $822,740. The tax rate is 40% for all years. No valuation account related to the deferred tax asset is in existence at the end of 2013.

(a) Record income tax expense, deferred income taxes, and income tax payable for 2014, 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.)

Account Titles and Explanation

Debit

Credit

(b) Assuming that it is more likely than not that $37,280 of the deferred tax asset will not be realized, prepare the journal entry at the end of 2014 to record the valuation account. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

Account Titles and Explanation

Debit

Credit

Explanation / Answer

Journal entry

Current Tax ........................Dr ( 822740*40%) 329096

Defer Tax ............................Dr ( 129850*0.40) 51940

To Profit and Loss 381036

( Being DTA booked and current tax expense booked )

Profit And Loss..............................Dr 37280

To Profit and loss

( Being Deferred Tax asset written off )

Related Questions

Navigate

• Browse (All)
• Browse J
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.