Callaway Corp. has a deferred tax asset account with a balance of $150,000 at the end of

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Callaway Corp. has a deferred tax asset account with a balance of $150,000 at the end of 2012 due to a single cumulative temporary difference of $375,000. At the end of 2013, this same temporary difference has increased to a cumulative amount of $500,000. Taxable income for 2013 is $850,000. The tax rate is 40% for all years. No valuation allowance related to the deferred tax asset is in existence at the end of 2012.

Instructions
  (a) Record income tax expense, deferred income taxes, and income taxes payable for 2013, assuming that it is more likely than not that the deferred tax asset will be realized.
  (b) Assuming that it is more likely than not that $30,000 of the deferred tax asset will not be realized, prepare the journal entry at the end of 2013 to record the valuation account.

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Related Book For  book-img-for-question

Intermediate Accounting

ISBN: 978-0470587287

14th Edition

Authors: kieso, weygandt and warfield.

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