Jen C Corp. has a deferred tax asset account with a balance of $150,356 at the e

Question

Jen C Corp. has a deferred tax asset account with a balance of $150,356 at the end of 2013 due to a single cumulative temporary difference of $375,890. At the end of 2014, this same temporary difference has increased to a cumulative amount of $518,160. Taxable income for 2014 is $857,420. The tax rate is 40% for all years. At the end of 2013, Jen C Corp. had a valuation account related to its deferred tax asset of $51,300.

(a) 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.

(b) 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

Explanation / Answer

(a) Income tax expenses Dr. 524582

To income tax payable($857420 * 40%) $342968

To Deferred tax liability($518160 * 40%) $207264

To Deferred tax liability $25650

Note:- it is assuming that the deferred tax assets is not realised in full ,hence realised it 50%.

(b) Income tax expenses Dr. 550232

To income tax payable($857420 * 40%) $342968

To Deferred tax liability($518160 * 40%) $207264

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