At the end of the year, the deferred tax asset account had a balance of $4 million attributable to a temporary difference of $16 million in a liability for estimated expenses. Taxable income is $60 million. No temporary differences existed at the beginning of the year, and the tax rate is 25%. Prepare the journal entry (s) to record income taxes, assuming it is more likely than not that three-fourths of the deferred tax asset will not ultimately 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).)

Question

Business

Guest

27 November, 19:59

At the end of the year, the deferred tax asset account had a balance of $4 million attributable to a temporary difference of $16 million in a liability for estimated expenses. Taxable income is $60 million. No temporary differences existed at the beginning of the year, and the tax rate is 25%. Prepare the journal entry (s) to record income taxes, assuming it is more likely than not that three-fourths of the deferred tax asset will not ultimately 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).)

+1

Answers (1)

Know the Answer?

Johnathon Lawrence · Answer 1

the answer given below;

Explanation:

$60 million * 25%=$15 million will be tax expense

Income Tax Expense-Current Dr.$15 million

Income Tax Payable Cr.$15 million

For temporary difference on liability, the journal entry will be

Deferred tax expense ($4*25%) $1 million

Deferred Tax liability $1 million