At the end of 2023, Payne Industries had a deferred tax asset account with a balance of $120 million attributable to a temporary book-tax difference of $480 million in a liability for estimated expenses. At the end of 2024, the temporary difference is $368 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable Income for 2024 Is $864 million and the tax rate is 25%. Required: 1. Prepare the Journal entry(s) to record Payne's Income taxes for 2024, assuming it is more likely than not that the deferred tax asset will be realized in full. 2. Prepare the journal entry(s) to record Payne's Income taxes for 2024, assuming it is more likely than not that only one-fourth of the deferred tax asset ultimately will be realized. Complete this question by entering your answers in the tabs below.

At the end of 2023, Payne Industries had a deferred tax asset account with a balance of $120 million attributable to a temporary book-tax difference of $480 million in a liability for estimated expenses. At the end of 2024, the temporary difference is $368 million. Payne has no other temporary differences and no valuation allowance for the deferred tax asset. Taxable Income for 2024 Is $864 million and the tax rate is 25%. Required: 1. Prepare the Journal entry(s) to record Payne's Income taxes for 2024, assuming it is more likely than not that the deferred tax asset will be realized in full. 2. Prepare the journal entry(s) to record Payne's Income taxes for 2024, assuming it is more likely than not that only one-fourth of the deferred tax asset ultimately will be realized. Complete this question by entering your answers in the tabs below.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Problem 16-7 (Static) Multiple differences; calculate taxable income; balance sheet classification; financial statement effects [LO16-2, 16-3, 16-5, 16-8] Sherrod, Incorporated, reported pretax accounting income of $76 million for 2024. The following information relates to differences between pretax accounting income and taxable income: a. Income from installment sales of properties included in pretax accounting income in 2024 exceeded that reported for tax purposes by $3 million. The installment receivable account at year-end 2024 had a balance of $7 million (representing portions of 2023 and 2024 installment sales), expected to be collected equally in 2025 and 2026. b. Sherrod was assessed a penalty of $2 million by the Environmental Protection Agency for violation of a federal law in 2024. The fine is to be paid in equal amounts in 2024 and 2025. c. Sherrod rents its operating facilities but owns one asset acquired in 2023 at a cost of $80 million. Depreciation is reported by the…
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Problem 16-7 (Algo) Multiple differences; calculate taxable income; balance sheet classification [LO16-2, 16-3, 16-5, 16-8] Sherrod, Inc., reported pretax accounting income of $92 million for 2021. The following information relates to differences between pretax accounting income and taxable income: Income from installment sales of properties included in pretax accounting income in 2021 exceeded that reported for tax purposes by $6 million. The installment receivable account at year-end 2021 had a balance of $8 million (representing portions of 2020 and 2021 installment sales), expected to be collected equally in 2022 and 2023. Sherrod was assessed a penalty of $3 million by the Environmental Protection Agency for violation of a federal law in 2021. The fine is to be paid in equal amounts in 2021 and 2022. Sherrod rents its operating facilities but owns one asset acquired in 2020 at a cost of $104 million. Depreciation is reported by the straight-line method, assuming a four-year…
Required information Problem 16-8 Multiple differences; taxable income given; two years; balance sheet classification; change in tax rate [LO16-4, 16-6, 16-8] [The following information applies to the questions displayed below.] Arndt, Inc., reported the following for 2018 and 2019 ($ in millions): 2018 2019 Revenues $ 995 $1,073 Expenses Pretax accounting income (income statement) Taxable income (tax return) 800 840 $ 195 $ 195 233 $ 245 Tax rate: 40% a. Expenses each year include $30 million from a two-year casualty insurance policy purchased in 2018 for $60 million. The cost is tax deductible in 2018. b. Expenses include $2 million insurance premiums each year for life insurance on key executives. c. Arndt sells one-year subscriptions to a weekly journal. Subscription sales collected and taxable in 2018 and 2019 were $39 million and $57 million, respectively. Subscriptions included in 2018 and 2019 financial reporting revenues were $36 million ($14 million collected in 2017 but not…
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Exercise 16-2 (Algo) Determine taxable income; determine prior year deferred tax amount; financial statement effects [LO16-2] On January 1, 2021, Ameen Company purchased major pieces of manufacturing equipment for a total of $54 million. Ameen uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, 2023, the book value of the equipment was $48 million and its tax basis was $38 million. At December 31, 2024, the book value of the equipment was $46 million and its tax basis was $31 million. There were no other temporary differences and no permanent differences. Pretax accounting income for 2024 was $35 million. Required: 1. Prepare the appropriate journal entry to record Ameen's 2024 income taxes. Assume an income tax rate of 25%, 2. What is Ameen's 2024 net income?
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