E19-14: Callaway Corp. has a deferred tax assetbalance of $150,000 at the end of 2013 due to a single cumulativetemporary difference of $375,000. At the end of 2014, this sametemporary difference has increased to a cumulative amount of$450,000. Taxable income for 2014 is $820,000. The tax rate is 40%for all years. No valuation account is in existence at the end of2013.
- Record income tax expense, deferred income taxes, and incometaxes payable for 2014 assuming that it is more likely than notthat the deferred tax asset will be realized.
- Assuming that it is more likely than not that $30,000 of thedeferred tax asset will not be realized, prepare the journal entryat the end of 2014 to record the valuation account.
- What if Congress enacts a new tax rate equal to 35% effective1/1/15?
