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

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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.

Pocus, Inc

Essay

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