E19-13 (L01,2) (Deferred Tax Asset with Previous Valuation Account) Assume the s
ID: 2546811 • Letter: E
Question
E19-13 (L01,2) (Deferred Tax Asset with Previous Valuation Account) Assume the same information as E19-12, except that at the end of 2016, Jennifer Capriati Corp. had a valuation account related to its deferred tax asset of $45,000.
Instructions
(a) Record income tax expense, deferred income taxes, and income taxes payable for 2017, 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 2017, assuming that it is more likely than not that none of the deferred tax asset will be realized.
Information needed from E19-12
Jennifer Caprioti Corp. has a deferred tax asset with a balance of $150,000 at the end of 2016 due to a single cumulative difference of $375,000. At the end of 2017, this same temporary difference has increased to a cumulative amount of $450,000. Taxable income for 2017 is $820,000. The tax rate is 40% for all years.
Explanation / Answer
1. INCOME TAX EXPENSE $ 298000 DEFERED TAX ASSET $ 30000
INCOME TAX PAYABLE $ 328000
DEFERED TAX ASSET REDUCTION ALLOWNACE $45000 INCOME TAX EXPENSE $45000
2. INCOME TAX EXPENSE $ 328000
DEFERED TAX ASSET $ 180000 INCOME TAX PAYABLE $ 148000
INCOME TAX EXPENSE $135000 ( 180-45)
DEFERED TAX ASSET REDUCTION ALLOWNACE $ 135000
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