Detailed Answer
(c) From 12/31/Y1 to 12/31/Y2, the deferred tax asset
increased by $5,000 (from $15,000 to $20,000). Income taxes
payable at 12/31/Y2 are $13,000. Based on this information, the
following journal entries can be recreated.
Income tax expense—current 13,000
Income tax payable 13,000
Deferred tax asset 5,000
Income tax expense—
deferred 5,000
An additional entry would be prepared by Shin to record an allowance
to reduce the deferred tax asset to its realizable value
(10% × $20,000 = $2,000).
Income tax expense—deferred 2,000
Allowance to reduce deferred
tax asset to realizable value 2,000
Based on these three entries, total year 2 income tax expense is
$10,000 ($13,000 – $5,000 + $2,000).