Chapter 16 HW 20. 10.00 points At the end of 2015, Payne industries had a deferr

Question

Chapter 16 HW 20. 10.00 points At the end of 2015, Payne industries had a deferred tax asset account with a balance of $34 milion attributable to a temporary book-tax difference of $85 million in a liability for estimated expenses. At the end of 2016, the temporary difference is $T0 milion. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable income for 2016 is $180 milion and the tax rate is 40%, Required: 1. Prepare the journal entry)(s) to record Payne's income taxes for 2016, assuming it is more likely than not that the deferred tax asset will be realized. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).) Record 2016 income taxes. Record valuation allowance for the end of 2016. 6,000,000 72,000,000 Note : -journal entry has been entered 2 3 4 Q W E

Explanation / Answer

1) Closing Balance of DTA required = $70 million*40% = $28 million

Opening Balance of DTA = $34 million

Credit required to DTA in 2016 = $34 million - $38 million = $6 million

Journal Entries (Amount in million $)

2)   Journal Entries (Amount in million $)

Event General Journal Debit Credit 1) Income tax Expense 78 Deferred Tax Asset 6 Income tax payable ($180 million*40%) 72 2) No Entry

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