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Chapter 19: Q13E. (page 1098)

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.

Short Answer

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Income is a term used when an organization earns a certain sum of moneyfrom the sale of its goods and services. The other name for income is revenue.

Step by step solution

01

(a) Journal entry

Date

Particulars

Debit

Credit

2017

Income tax expense

$298,000

Deferred tax asset

[$450,000脳40%-$150,000]

$30,000

Income tax payable

($820,000脳40%)

$328,000

(To record the income tax expense)

02

(b) Recording the journal entry

Date

Particulars

Debit

Credit

2017

Income tax expense

$45,000

Deferred tax asset-valuation adjustment

$45,000

(To record the valuation account)

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Most popular questions from this chapter

In 2017, Amirante Corporation had pretax financial income of \(168,000 and taxable income of \)120,000. The difference is due to the use of different depreciation methods for tax and accounting purposes. The effective tax rate is 40%. Compute the amount to be reported as income taxes payable at December 31, 2017.

Dexter Company appropriately uses the asset-liability method to record deferred income taxes. Dexter reports depreciation expense for certain machinery purchased this year using the modified accelerated cost recovery system (MACRS) for income tax purposes and the straight-line basis for financial reporting purposes. The tax deduction is the larger amount this year. Dexter received rent revenues in advance this year. These revenues are included in this year鈥檚 taxable income. However, for financial reporting purposes, these revenues are reported as unearned revenues, a current liability. Instructions (c) How should Dexter classify the deferred tax consequences of the temporary differences on its balance sheet?

What are the two objectives of accounting for income taxes?

The book basis of depreciable assets for Erwin Co. is \(900,000, and the tax basis is \)700,000 at the end of 2018. The enacted tax rate is 34% for all periods. Determine the amount of deferred taxes to be reported on the balance sheet at the end of 2018.

Addison Co. has one temporary difference at the beginning of 2017 of \(500,000. The deferred tax liability established for this amount is \)150,000, based on a tax rate of 30%. The temporary difference will provide the following taxable amounts: \(100,000 in 2018, \)200,000 in 2019, and $200,000 in 2020. If a new tax rate for 2020 of 20% is enacted into law at the end of 2017, what is the journal entry necessary in 2017 (if any) to adjust deferred taxes?
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