1 answer

Corning-Howell reported taxable income in 2018 of $220 million. At December 31, 2018, the reported amount...

Question:

Corning-Howell reported taxable income in 2018 of $220 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:

carrying amt tax basis

Current
Net accounts receivable $ 13 million $ 18 million
Prepaid insurance 42 million 0
Prepaid advertising 6 million 0
Noncurrent
Investments at fair value with changes in OCI* 7 million 0
Buildings and equipment (net) 420 million 350 million
Liabilities
Current
Liability—subscriptions received 20 million 0
Long-term
Liability—postretirement benefits 620 million 0

*Gains and losses taxable when investments are sold.

The total deferred tax asset and deferred tax liability amounts at January 1, 2018, were $260 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.


Answers

1 Temporary difference Future taxable amount Future deductible amount 5,000,000.00 Net accounts receivable Prepaid insurance Prepaid advertisin Building and equipment (net Liabilities- subscriptions received Liability- Postretirement benefits Investment in securities Totals lax rate Deferred tax liabili Deferred tax asset 42,000,000.00 6,000,000.00 70,000,000.00 2,000,000.00 620,000,000.00 7,000,000.00 125,000,000.00 $ 627,000,000.00 40% 40% 50,000,000.00 250,800,000.00 2 Deferred tax liabili Deferred tax asset Ending balances (current needed Less: beginning balances Change needed to achieve desired balances 50,000,000.00 $ 45,000,000.00 $ 5,000,000.00$ 250,800,000.00 260,000,000.00 9,200,000.00 3 Taxable income for 2018 220,000,000.00 40% 88,000,000.00 lax rate Income tax payable 4 Particulars DR CR Income tax expense Deferred tax asset Deferred tax liabilit Income tax payable To record the income tax provision for 2016 102,200,000.00 5,000,000.00 9,200,000.00 88,000,000.00

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