Answered: Exhibit 25.10 presents deferred tax…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Exhibit 25.10 presents deferred tax assets and liabilities for ToyCo. Reorganize the deferred tax table into three categories net operating deferred tax liabilities (net of operating deferred tax assets), nonoperating deferred tax assets, and nonoperating deferred tax liabilities. In Year 3, ToyCo generated $200.7 million in operating taxes on $673.6 million of EBITA. Using this information, what are the cash taxes in Year 3? What is percent of operating taxes that were deferred and what is the operating cash tax rate?

ToyCo has working capital of $400 million, fixed assets equal to $800 million, and debt equal to
$600 million. Use this data and the reorganized deferred taxes in Question 4 to create invested
capital and total funds invested for Year 3. Use equity as the plug to get total fund invested to
reconcile.

Exhibit 25.10 ToyCo: Deferred Tax Assets and Liabilities
$ million
Deferred tax assets
Accounts receivable
Inventories
Losses and tax credit carryforwards
Pension
Net deferred tax assets
Deferred tax liabilities
Convertible debentures
Depreciation of long-lived assets
Equity method investment
Deferred tax liabilities
Year 1
20.5
24.6
39.1
10.0
94.2
40.2
15.9
0.0
123.8
Year 2
16.8
20.2
34.4
34.1
105.5
47.6
40.5
0.0
123.8
Year 3
17.3
15.9
29.6
26.6
89.4
56.8
40.1
26.9
157.0

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