Problem $13-43(LO.7)$

Jazz, Inc., claimed $$100,000of$ rehabilitation credits $on$ its $2022$ tax return. There was sufficient tax authority $to$ claim the credits. However,

due $to$ uncertainty regarding the eligibility $of$ some $of$ the expenditures, Jazz only recognized $$70,000of$ the benefits $in$ its $2022$ financial

statements. When its tax return was audited $in2025,$ the IRS challenged the eligibility $of$ some $of$ the expenditures and Jazz agreed $to$ pay

$$20,000$ additional tax $to$ settle the dispute.

$a.By$ how much does the settlement impact Jazz's $2025$ book tax expense?

Check $My$ Work

Given the complexity $of$ business transactions, $as$ well $as$ the related tax laws, how tax law applies $to$ a given transaction may sometimes $be$

uncertain. Financial Accounting Standards Interpretation $(FIN)48,$ incorporated into ASC $740-10$ addresses how this uncertainty should impact

the accounting for income taxes. Whether the tax benefits $ofan$ uncertain position may $be$ recognized $at$ all depends $on$ the strength $of$ the tax

authority supporting the position. For tax purposes, taxpayers may take a tax position $as$ long $as$ there $is$ substantial authority for the position.

$b.$ Provide the journal entry necessary $to$ record the $2025$ tax payment.

JOURNAL

DATE

Description

Post. Ref.

Debit

Credit