At the End of the Preceding Year, World Industries Had

question 95

Essay

At the end of the preceding year, World Industries had a deferred tax asset of $17,500,000, attributable to its only temporary difference of $50,000,000 for estimated expenses. At the end of the current year, the temporary difference is $45,000,000. At the beginning of the year there was no valuation account for the deferred tax asset. At year-end, World Industries now estimates that it is more likely than not that one-third of the deferred tax asset will never be realized. Taxable income is $12,000,000 for the current year and the tax rate is 30% for all years.
Required:
Prepare journal entries to record World Industries' income tax expense for the current year. Show well-labeled supporting computations for each component of the journal entries.

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Definitions:

Stockbroker

A professional who buys and sells stocks and other securities through market exchanges on behalf of investors, typically in exchange for a fee or commission.

Service

Activities or processes that provide value to customers or beneficiaries, often intangible, and aimed at meeting their needs or solving problems.

Service Technology

Technologies and systems designed to improve and support the delivery, management, and quality of services.

Passenger

An individual who travels in a vehicle, such as a car, bus, train, or airplane, typically without participating in its operation.