Corning-Howell reported taxable income in 2018 of $140 million. At December 31,
ID: 2550498 • Letter: C
Question
Corning-Howell reported taxable income in 2018 of $140 million. At December 31, 2018, the reported amount of some assets and liabilities in the financial statements differed from their tax bases as indicated below:
*Gains and losses taxable when investments are sold.
The total deferred tax asset and deferred tax liability amounts at January 1, 2018, were $230 million and $45 million, respectively. The enacted tax rate is 40% each year.
Required:
1. Determine the total deferred tax asset and deferred tax liability amounts at December 31, 2018.
2. Determine the increase (decrease) in the deferred tax asset and deferred tax liability accounts at December 31, 2018.
3. Determine the income tax payable currently for the year ended December 31, 2018.
4. Prepare the journal entry to record income taxes for 2018.
Explanation / Answer
Please find below answer of your question. If this helped, please hit LIKE button. 1 Deferred Tax assets and Liabilities Deferred Tax Asset: Working $ Million Bad Debt Allowance (14-20)*40% 2.4 Subscription Liability 14*40% 5.6 Post Retirment Benefit 540*40% 216 Deferred Tax Asset: 224 Deferred Tax Liability: Prepaid Insurance 32*40% 12.8 Prepaid Advertising 7*40% 2.8 Investment Realisation gain 6*40% 2.4 Building (380-290)*40% 36 Deferred Tax Liability 54 2 Increase or Decrease Deferred Tax Asset Deferred Tax Liability Closing Balance (From 1) 224 54 Less:Beginning Balance 230 45 Increase (Decrease) -6 9 3 Tax Payable Taxable income*40% 140*40%=56 M 4 Journal Debit Credit Tax Expense (56+9+6) 71 Deferred Tax Asset (Decrease in asset, hence credit) 6 Deferred Tax Liability 9 Taxes Payable (140*40%) 56