Question: Callaway SA has a deferred tax asset account with a balance of 150,000 at the end of 2018 due to a single cumulative temporary difference

Callaway SA has a deferred tax asset account with a balance of €150,000 at the end of 2018 due to a single cumulative temporary difference of €375,000. At the end of 2019, this same temporary difference has increased to a cumulative amount of €500,000. Taxable income for 2019 is €850,000. The tax rate is 40% for all years.
Instructions
a. Record income tax expense, deferred income taxes, and income taxes payable for 2019, assuming that it is probable that the deferred tax asset will be realized.
b. Assuming that it is probable that €30,000 of the deferred tax asset will not be realized, prepare the journal entry at the end of 2019 to recognize this probability.

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a Income Tax Expense 290000 Deferred Tax Asset 50000 Income Taxes Payable 340000 Taxable income 8500... View full answer

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