How do you get the answer on below? Corning-Howell reported taxable income in 2021 of $156 million. At December 31, 2021, the reported amount of some assets and liabilities in the financial statements differed from their tax bases as indicated below: Carrying Amount Tax Basis Assets Current Net accounts receivable $ 44 million $ 48 million Prepaid insurance 56 million 0 Prepaid advertising 40 million 0 Noncurrent Investments in equity securities (fair value)* 40 million 0 Buildings and equipment (net) 396 million 316 million Liabilities Current Deferred subscription revenue 48 million 0 Long-term Liability—compensated future absences 630 million 0 *Gains and losses taxable when investments are sold. The total deferred tax asset and deferred tax liability amounts at January 1, 2021, were $174.25 million and $25 million, respectively. The enacted tax rate is 25% each year. Required: 1. Determine the total deferred tax asset and deferred tax liability amounts at December 31, 2021. 2. Determine the increase (decrease) in the deferred tax asset and deferred tax liability accounts at December 31, 2021. 3. Determine the income tax payable currently for the year ended December 31, 2021. 4. Prepare the journal entry to record income taxes for 2021.

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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Corning-Howell reported taxable income in 2021 of $156 million. At December 31, 2021, the reported amount of some assets and liabilities in the financial statements differed from their tax bases as indicated below:

	Carrying Amount		Tax Basis
Assets
Current
Net accounts receivable	$	44	million	$	48	million
Prepaid insurance		56	million		0
Prepaid advertising		40	million		0
Noncurrent
Investments in equity securities (fair value)*		40	million		0
Buildings and equipment (net)		396	million		316	million
Liabilities
Current
Deferred subscription revenue		48	million		0
Long-term
Liability—compensated future absences		630	million		0

^*Gains and losses taxable when investments are sold.

The total deferred tax asset and deferred tax liability amounts at January 1, 2021, were $174.25 million and $25 million, respectively. The enacted tax rate is 25% each year.

Required:
1. Determine the total deferred tax asset and deferred tax liability amounts at December 31, 2021.
2. Determine the increase (decrease) in the deferred tax asset and deferred tax liability accounts at December 31, 2021.
3. Determine the income tax payable currently for the year ended December 31, 2021.
4. Prepare the journal entry to record income taxes for 2021.

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