Question

At the end of 2015, Harrybean's tax accountant indicated that only $1,000 of the $2100 balance in deferred tax assets that Harrybean would otherwise have on its balance sheet was realizable from a 51 % profitability. Record any entry (ies) necessary to reflect this information and create any t-accounts that would be necessary.

Deferred Tax Asset

$800

$1300

$2100

Answer 1

Opening balance of deferred tax asset = 2100
Closing balance is 1000
Journal entry :					Tax expense			Deferred tax asset
Transaction	Dr	Cr	Narration	Transaction	Dr	Transaction	Dr	Transaction	Dr	Transaction	Dr
Tax expense	1100		For reduction in DTA in the current year	Deferred tax asset (2100-1000)	1100			Opening balance	2100	Tax expense	1100
Deferred tax asset (2100-1000)		1100	For reduction in DTA in the current year							Closing balance	1000
									2100		2100
Case ii
Closing DTA is 800					Tax expense			Deferred tax asset
Transaction	Dr	Cr	Narration	Transaction	Dr	Transaction	Dr	Transaction	Dr	Transaction	Dr
Tax expense	1300		For reduction in DTA in the current year	Deferred tax asset (2100-800)	1300			Opening balance	2100	Tax expense	1300
Deferred tax asset (2100-800)		1300	For reduction in DTA in the current year							Closing balance	800
									2100		2100
Case iii
Closing DTA is 1300					Tax expense			Deferred tax asset
Transaction	Dr	Cr	Narration	Transaction	Dr	Transaction	Dr	Transaction	Dr	Transaction	Dr
Tax expense	800		For reduction in DTA in the current year	Deferred tax asset (2100-1300)	800			Opening balance	2100	Tax expense	800
Deferred tax asset (2100-1300)		800	For reduction in DTA in the current year							Closing balance	1300
									2100		2100
Case iii
Closing DTA is 2100					Tax expense			Deferred tax asset
Transaction	Dr	Cr	Narration	Transaction	Dr	Transaction	Dr	Transaction	Dr	Transaction	Dr
No entry required				0	0			Opening balance	2100	No entry required	0
										Closing balance	2100
									2100		2100