Question

Vaughn Corp. has a deferred tax asset account with a balance of $75,920 at the end of 2019 due to a single cumulative temporary difference of $379,600. At the end of 2020, this same temporary difference has increased to a cumulative amount of $416,500. Taxable income for 2020 is $795,500. The tax rate is 20% for all years. At the end of 2019, Vaughn Corp. had a valuation account related to its deferred tax asset of $47,400.

(a) Record income tax expense, deferred income taxes, and income taxes payable for 2020, assuming that it is more likely than not that the deferred tax asset will be realized in full. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
(To record income tax expense)
(To adjust allowance account)

(b) Record income tax expense, deferred income taxes, and income taxes payable for 2020, assuming that it is more likely than not that none of the deferred tax asset will be realized. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
(To record income tax expense)
(To record allowance)

Answer 1

Answer:
a)
Acounts Titles and Explanation	Debit (in $)	Credit (in $)
Income Tax Expense ($795,500 (-) $36,900) x 20%	$151,720
Deferred Income Tax Asset ($416,500 (-) $379,600) = $36,900 x 20%)	$7,380
Income Tax Payable                         ($795,500 x 20%)		$159,100
(To record income tax expense)
Deferred Tax Asset Valuation Account	$47,400
Income Tax Expense		$47,400
(To record the adjustment of allowance account)
b)
Acounts Titles and Explanation	Debit (in $)	Credit (in $)
Income Tax Expense	$151,720
Deferred Income Tax Asset	$7,380
Income Tax Payable		$159,100
(To record income tax expense)
Income Tax Expense	$35,900
Deferred Tax Asset Valuation Account                   ($75,920 + $7,380 (-) $47,400)		$35,900
(To record allowance)