At December 31, 2020, Rams Company had a Deferred Tax Asset of $200,000. After careful review...

Transcribed Image Text:

At December 31, 2020, Rams Company had a Deferred Tax Asset of $200,000. After careful review of all available evidence, Rams determines that it is more likely than not that it will not realize $80,000 of this deferred tax asset. The journal entry to record this reduction in asset value is Debit: Deferred Tax Asset- -80,000; Credit: Income Taxes Payable- -80,000. Debit: Deferred Tax Asset- -80,000; Credit: Allowance to Reduce Deferred Tax Asset- -80,000. Debit: Income Tax Expense- -80,000; Credit: Allowance to Reduce Deferred Tax Asset- -80,000. Debit: Income Tax Expense--80,000; Credit Income Tax Payable- -80,000. At December 31, 2020, Rams Company had a Deferred Tax Asset of $200,000. After careful review of all available evidence, Rams determines that it is more likely than not that it will not realize $80,000 of this deferred tax asset. The journal entry to record this reduction in asset value is Debit: Deferred Tax Asset- -80,000; Credit: Income Taxes Payable- -80,000. Debit: Deferred Tax Asset- -80,000; Credit: Allowance to Reduce Deferred Tax Asset- -80,000. Debit: Income Tax Expense- -80,000; Credit: Allowance to Reduce Deferred Tax Asset- -80,000. Debit: Income Tax Expense--80,000; Credit Income Tax Payable- -80,000.

Answer rating: 100% (QA)

The correct option is C Journal entry ... View the full answer