Prepare journal entry at end of 2008

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Jennifer Capriati Corp. has a deferred tax asset account with a balance of $150,000 at the end of 2007 due to a single cumulative temporary difference of $375,000. At the end of 2008 this same temporary difference has increased to a cumulative amount of $450,000.

Taxable income for 2008 is $820,000. The tax rate is 40% for all years. No valuation account related to the deferred tax asset is in existence at the end of 2007.

Instructions

(a) Record income tax expense, deferred income taxes, and income taxes payable for 2008, assuming that it is more likely than not that the deferred tax asset will be realized.

(b) Assuming that it is more likely than not that $30,000 of the deferred tax asset will not be realized, prepare the journal entry at the end of 2008 to record the valuation account.

Reference no: EM13537945

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