Question

Assume the same information as E19-12, except that at the end of 2016, Jennifer Capriati Corp. had a valuation account related to its deferred tax asset of $45,000. Instructions (a) Record income tax expense, deferred income taxes, and income taxes payable for 2017, assuming that it is more likely than not that the deferred tax asset will be realized in full. (b) Record income tax expense, deferred income taxes, and income taxes payable for 2017, assuming that it is more likely than not that none of the deferred tax asset will be realized.

Short answer

Income is a term used when an organization earns a certain sum of moneyfrom the sale of its goods and services. The other name for income is revenue.

Step-by-step solution

(a) Journal entry

Date	Particulars	Debit	Credit
2017	Income tax expense	$298,000
	Deferred tax asset $\left[\left(\$450,000\times 40\%\right)-\$150,000\right]$	$30,000
	Income tax payable $\left(\$820,000\times 40\%\right)$		$328,000
	(To record the income tax expense)

(b) Recording the journal entry

Date	Particulars	Debit	Credit
2017	Income tax expense	$45,000
	Deferred tax asset-valuation adjustment		$45,000
	(To record the valuation account)