Jennifer Capriati Corp. has a deferred tax asset account with a balance of $154,
ID: 2417660 • Letter: J
Question
Jennifer Capriati Corp. has a deferred tax asset account with a balance of $154,412 at the end of 2013 due to a single cumulative temporary difference of $386,030. At the end of 2014, this same temporary difference has increased to a cumulative amount of $509,010. Taxable income for 2014 is $861,240. The tax rate is 40% for all years. At the end of 2013, Jennifer Capriati Corp. had a valuation account related to its deferred tax asset of $52,100. Record income tax expense, deferred income taxes, and income taxes payable for 2014, assuming that it is more likely than not that the deferred tax asset will be realized in full. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Record income tax expense, deferred income taxes, and income taxes payable for 2014, assuming that it is more likely than not that none of the deferred tax asset will be realized. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)Explanation / Answer
Journal Date Description Debit Credit a Income Tax Expense $ 295,304 Deferred Tax Asset $ 49,192 Income tax Payable $ 344,496 (To record income taxes) Valuation Adjustment, DTA $ 52,100 Income Tax Provision $ 52,100 (To adjust allowance account) b Income Tax Expense $ 295,304 Deferred Tax Asset $ 49,192 Income tax Payable $ 344,496 (To record income taxes) Income Tax Provision $ 49,192 Valuation Adjustment, DTA $ 49,192 (To record allowance) Note: Cumulative Tax Asset Difference $ 509,010 Tax Rate 40% 31/12/2014, deferred tax asset $ 203,604 31/12/2013, deferred tax asset $ 154,412 Adjustment $ 49,192 Taxable Income $ 861,240 Tax Rate 40% Income Tax Payable $ 344,496
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