Answer:
A.
1. Dr Income tax expense $144
Cr To Deferred Tax Assets $18
Cr To Income Tax Payable $126
2. No Journal Entry
B.
1. Dr Income tax expense $144
Cr To Deferred Tax Assets $18
Cr To Income Tax Payable $126
2. Dr Income tax expense $39
Cr To Valuation Allowance - Deferred Tax Assets $39
Explanation:
A. Preparation of the journal entry(s) to record Payne’s income taxes for 2021
1. Dr Income tax expense $144
($126+$18)
Cr To Deferred Tax Assets $18
[($280-$208)*25%]
Cr To Income Tax Payable $126
($504*25%)
(Being income tax expense recorded for 2021 and deferred tax assets reversed for temporary differences reversal )
2 No Journal Entry
B. Preparation of the journal entry(s) to record Payne’s income taxes for 2021
1. Dr Income tax expense $144
($126+$18)
Cr To Deferred Tax Assets $18
[($280-$208)*25%]
Cr To Income Tax Payable $126
($504*25%)
(Being income tax expense recorded for 2021 and deferred tax assets reversed for temporary differences reversal )
2. Dr Income tax expense $39
Cr To Valuation Allowance - Deferred Tax Assets $39
[($208*75%)*25%]
(To record valuation allowance for deferred tax assets)
