Prepare the journal entry to recognize the probability

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Question: Callaway Corp. has a deferred tax asset account with a balance of $150,000 at the end of 2014 due to a single cumulative temporary difference of $375,000. At the end of 2015, this same temporary difference has increased to a cumulative amount of $500,000. Taxable income for 2015 is $850,000. The tax rate is 40% for all years.

Instructions: (a) Record income tax expense, deferred income taxes, and income taxes payable for 2015, assuming that it is probable that the deferred tax asset will be realized.

(b) Assuming that it is probable that $30,000 of the deferred tax asset will not be realized, prepare the journal entry at the end of 2015 to recognize this probability.

Reference no: EM131592733

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