Allied Corp. has a deferred tax asset balance of $50,000 on December 31, 2020, due to...

 

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Allied Corp. has a deferred tax asset balance of $50,000 on December 31, 2020, due to a temporary difference related to a warranty expense accrual that is not deductible for tax purposes. The deferred tax asset balance has increased $10,000 over the prior year ending balance of $40,000. Taxable income for 2020 is $210,000 and the tax rate is 25%. There was no valuation allowance recorded on December 31, 2019. Required a. Record the income tax journal entry on December 31, 2020, assuming that it is more likely than not that the deferred tax asset will be realized. b. Record the income tax journal entries on December 31, 2020, assuming that it is more likely than not that only 60% of the deferred tax asset will be realized. Allied Corp. has a deferred tax asset balance of $50,000 on December 31, 2020, due to a temporary difference related to a warranty expense accrual that is not deductible for tax purposes. The deferred tax asset balance has increased $10,000 over the prior year ending balance of $40,000. Taxable income for 2020 is $210,000 and the tax rate is 25%. There was no valuation allowance recorded on December 31, 2019. Required a. Record the income tax journal entry on December 31, 2020, assuming that it is more likely than not that the deferred tax asset will be realized. b. Record the income tax journal entries on December 31, 2020, assuming that it is more likely than not that only 60% of the deferred tax asset will be realized.

Answer rating: 100% (QA)

Date Dec 31 2020 Dec 31 2020 Date Dec 31 2020 Dec 31 2020 General Journal Acco... View the full answer