Deferred tax asset, Taxation

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Deferred tax asset; taxable income given; valuation allowance.
At the end of 2012, Payne Industries had a deferred tax asset account with a balance of $30 million attributable to a temporary book-tax difference of $75 million in a liability for estimated expenses. At the end of 2013, the temporary difference is $70 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2013 is $180 million and the tax rate is 40%.

Required:

1.Prepare the journal entry(s) to record Payne's income taxes for 2013, assuming it is more likely than not that the deferred tax asset will be realized.

2.Prepare the journal entry(s) to record Payne's income taxes for 2013, assuming it is more likely than not that one-half of the deferred tax asset will ultimately be realized

 


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