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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.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M917406

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