Jennifer Capriati Corp. has a deferred tax asset account with a balance of $157,

Question

Jennifer Capriati Corp. has a deferred tax asset account with a balance of $157,236 at the end of 2013 due to a single cumulative temporary difference of $393,090. At the end of 2014, this same temporary difference has increased to a cumulative amount of $480,540. Taxable income for 2014 is $842,460. 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.)

(b)  Assuming that it is more likely than not that $49,410 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.)

(PREVIOUS RESPONSE TO (B) IS INCORRECT)

Explanation / Answer

Answer:(a)

ENTRY EXCLUDING VALUATION ALLOWANCE:

Deferred tax asset A/C Dr.             $ 34980

Income tax provision (plug) A/C Dr. $302004

   To Income tax payable A/C $ 336984

Answer:(b) ENTRY TO RECORD VALUATION ALLOWANCE:

Income tax provision 34980

          To Valuation adjustment, DTA 34980

Cumulative tax asset differences 480540 Tax rate 40% 12/31/2014 deferred tax asset 192216 Already on books 157236 Adjustment 34980 Taxable income 842460 Tax rate 40% Income tax 336984

Related Questions

Navigate

• Browse (All)
• Browse J
• Subjects

---

---

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