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At the end of 2017, Payne Industries had a deferred tax asset account with a balance...

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Accounting

At the end of 2017, Payne Industries had a deferred tax assetaccount with a balance of $30 million attributable to a temporarybook–tax difference of $75 million in a liability for estimatedexpenses. At the end of 2018, the temporary difference is $70million. Payne has no other temporary differences and no valuationallowance for the deferred tax asset. Taxable income for 2018 is$180 million and the tax rate is 40%.

Required:
1. Prepare the journal entry(s) to record Payne’sincome taxes for 2018, assuming it is more likely than not that thedeferred tax asset will be realized.
2. Prepare the journal entry(s) to record Payne’s incometaxes for 2018, assuming it is more likely than not that one-fourthof the deferred tax asset will ultimately be realized.

  • Record valuation allowance for the endof 2018.

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