Reference no: EM132960501

Question - Skysong Corp. has a deferred tax asset account with a balance of $73,800 at the end of 2019 due to a single cumulative temporary difference of $369,000. At the end of 2020, this same temporary difference has increased to a cumulative amount of $471,000. Taxable income for 2020 is $890,000. The tax rate is 20% for all years. No valuation account related to the deferred tax asset is in existence at the end of 2019.

(a) Record income tax expense, deferred income taxes, and income taxes payable for 2020, 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 $20,400 of the deferred tax asset will not be realized, prepare the journal entry at the end of 2020 to record the valuation account.