Assume the same information as E18.12, except that at the end of 2024, Jennifer Capriati Corp. had a valuation account related to its deferred tax asset of $22,500.

Instructions

a. Record income tax expense, deferred income taxes, and income taxes payable for 2025, 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 2025, assuming that it is more likely than not that none of the deferred tax asset will be realized.

Data from E18.12

Jennifer Capriati Corp. has a deferred tax asset account with a balance of $75,000 at the end of 2024 due to a single cumulative temporary difference of $375,000. At the end of 2025, this same temporary difference has increased to a cumulative amount of $450,000. Taxable income for 2025 is $820,000. The tax rate is 20% for all years. No valuation account related to the deferred tax asset is in existence at the end of 2024.