At the Beginning of 2016, Jasper Company Had a Deferred

question 101

Essay

At the beginning of 2016, Jasper Company had a deferred tax asset of $7,000 related to the warranty liability on its balance sheet. At the end of 2016, the company estimates that its ending warranty liability is $40,000. Taxable income is $60,000, and the tax rate is 40%.
Required:
a. Prepare the journal entry to record income taxes for the year.
b. Assume the company decides at the end of the year that it is "more likely than not" that $11,000 of the deductible temporary difference will not be realized. Prepare the appropriate journal entry.
c. Show how the deferred tax asset would be reported on the balance sheet for
2016.

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Definitions:

Reflective Judgment

In Kitchener’s theory of the development of problem solving, the analysis of the elements of a problem and justification of problem solutions.

Environmental Pressures

Forces from the surrounding environment that influence the behavior, decisions, or wellbeing of an individual or organization.

Higher Education

An advanced level of education pursued after completing high school, often at colleges, universities, or specialized institutions.

Reasoning Skills

The capacity to think logically, understand complex ideas, draw inferences, and solve problems through analytical thinking.