The Answer is Income tax expense (to balance) 6 , 020 , 000 Deferred tax asset [ ( $ 200 , 000 × 30 % ) − $ 80 , 000 ] 20 , 000 Income tax payable ( $ 20 , 000 , 000 × 30 % ) 6 , 000 , 000 \begin{array}{cr}\text { Income tax expense (to balance) }&6,020,000\\\text { Deferred tax asset }\\{[(\$ 200,000 \times 30 \%)-\$ 80,000]} & 20,000 \\\text { Income tax payable }(\$ 20,000,000 \times 30 \%) & 6,000,000\end{array} Income tax expense (to balance) Deferred tax asset [( $200 , 000 × 30% ) − $80 , 000 ] Income tax payable ( $20 , 000 , 000 × 30% ) 6 , 020 , 000 20 , 000 6 , 000 , 000

Solved

Pocus, Inc

question 3

Essay

Pocus, Inc., reports bad debt expense using the allowance method. For tax purposes the direct write-off method is used. At the end of the current year, Pocus has accounts receivable and an allowance for uncollectible accounts of $5,000,000 and $200,000, respectively, and taxable income of $20,000,000. At the end of the previous year, Pocus reported a deferred tax asset of $80,000 related to the difference in reporting bad debts, its only temporary difference. The enacted tax rate is 30% each year.
Required:
Prepare the appropriate journal entry for Pocus to record the income tax provision for the current year. Show well-labeled supporting computations.

Definitions:

Special Damages

In a tort case, an amount awarded to compensate the plaintiff for quantifiable monetary losses, such as medical expenses, property damage, and lost wages and benefits (now and in the future).

Monetary Losses

Financial damages or losses, usually in terms of money or assets.

Medical Expenses

Costs incurred for diagnosis, cure, mitigation, treatment, or prevention of disease, and for treatments affecting any part or function of the body.

Standard of Reasonable Care

A legal benchmark requiring that an individual or organization act with the same level of judgement and diligence as a prudent person would in similar circumstances.