AA owns 70% of BB. You were provided with the following information for intercompany transactions between AA and BB during 2022. On December 31, 2021 there was inventory in the warehouses of AA that was purchased from BB. The gross profit earned on this sale on this remaining inventory was $32,000 (before tax). All of this inventory was sold to outside parties in 2022. On January 1, 2022, AA purchased inventory from BB. The value of this inventory on the books of BB prior to the sale was $40,000. The gross markup (profit) earned by BB was 35%. Forty percent of this inventory remained in the warehouses of AA at the end of 2022, with the remaining sold to outside parties during 2022 On June 30, 2022 AA sold inventory to BB. The Gross profit before tax on this sale was $15,000. At the end of 2022, 65% of this inventory was still in the warehouses of BB. Also on June 30, 2022 BB sold land to AA. This historical cost of this land on the books of BB was $110,000. The gross profit before tax on this sale was 20%. None of the land was sold to outsiders during 2022.
AA owns 70% of BB. You were provided with the following information for intercompany transactions between AA and BB during 2022. On December 31, 2021 there was inventory in the warehouses of AA that was purchased from BB. The gross profit earned on this sale on this remaining inventory was $32,000 (before tax). All of this inventory was sold to outside parties in 2022. On January 1, 2022, AA purchased inventory from BB. The value of this inventory on the books of BB prior to the sale was $40,000. The gross markup (profit) earned by BB was 35%. Forty percent of this inventory remained in the warehouses of AA at the end of 2022, with the remaining sold to outside parties during 2022 On June 30, 2022 AA sold inventory to BB. The Gross profit before tax on this sale was $15,000. At the end of 2022, 65% of this inventory was still in the warehouses of BB. Also on June 30, 2022 BB sold land to AA. This historical cost of this land on the books of BB was $110,000. The gross profit before tax on this sale was 20%. None of the land was sold to outsiders during 2022.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Ff.55.
Transcribed Image Text:AA owns 70% of BB. You were provided with the following information for intercompany transactions between AA and BB
during 2022.
On December 31, 2021 there was inventory in the warehouses of AA that was purchased from BB. The gross profit earned
on this sale on this remaining inventory was $32,000 (before tax). All of this inventory was sold to outside parties in 2022.
On January 1, 2022, AA purchased inventory from BB. The value of this inventory on the books of BB prior to the sale was
$40,000. The gross markup (profit) earned by BB was 35%. Forty percent of this inventory remained in the warehouses of
AA at the end of 2022, with the remaining sold to outside parties during 2022
On June 30, 2022 AA sold inventory to BB. The Gross profit before tax on this sale was $15,000. At the end of 2022, 65%
of this inventory was still in the warehouses of BB.
Also on June 30, 2022 BB sold land to AA. This historical cost of this land on the books of BB was $110,000. The gross
profit before tax on this sale was 20%. None of the land was sold to outsiders during 2022.
On July 1, 2022 AA sold land to BB. The gross profit earned before tax was $12,000. On October 31, 2022, BB sold this
land to an outside party.
The opening balance of the Non-Controlling Interest (NCI) on January 1, 2022 was $55,000.
Required
What is the value of the Deferred Tax Asset that would that would appear on the consolidated Balance Sheet at
December 31, 2022? Assume a 35% tax rate.
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