Q1) Corning Howell reported taxable income in 2009 of $120 million. At December 31, 2009, reported amount of some assets and liabilities in financial statements differed from their tax basis as listed below:
|
Assets
|
Carrying Amount
|
Tax Basis
|
|
Current
|
|
|
|
Accounts Receivable
|
$ 10 million
|
$ 12 million
|
|
Prepaid insurance
|
20 million
|
$0
|
|
Prepaid rent insurance
|
6 million
|
$0
|
|
Non current
|
|
|
|
Buildings and equipment (net)
|
360 million
|
280 million
|
|
Liabilities
|
|
|
|
Current
|
|
|
|
Liability- subscriptions received
|
14 million
|
0
|
|
Long-term
|
|
|
|
Liability- postretirement benefits
|
594 million
|
0
|
|
Shareholders' Equity
|
|
|
|
Unrealized gain from recording investments
|
4 million
|
0
|
|
Available for sale at fair market value
|
|
|
Total deferred tax asset and deferred tax liability amounts at January 1, 2009, were $250 million and $40 million, respectively. Enacted tax rate is 40 % each year.
1. Find out total deferred tax asset and deferred tax liability amounts at December 31, 2009.
2. Find out the increase (decrease) in the deferred tax asset and deferred tax liability accounts at December 31, 2009.
3. Find out the income tax payable currently for the year ended December 31, 2009.
4 .Make the journal entry to record income taxes for 2009.
5. Illustrate how deferred tax amounts must be categorised and reported in 2009 balance sheet.