Tax credit; uncertainty regarding sustainability • LO16–9 Delta Catfish Company has taken a position in its tax return to claim a tax credit of $10 million (direct reduction in taxes payable) and has determined that its sustainability is “more likely than not,” based on its technical merits. Delta has developed the probability table shown below of all possible material outcomes ($ in millions): Delta’s taxable income is $85 million for the year. Its effective tax rate is 40%. The tax credit would be a direct reduction in current taxes payable. Required: 1. At what amount would Delta measure the tax benefit in its income statement? 2. Prepare the appropriate journal entry for Delta to record its income taxes for the year.
Tax credit; uncertainty regarding sustainability • LO16–9 Delta Catfish Company has taken a position in its tax return to claim a tax credit of $10 million (direct reduction in taxes payable) and has determined that its sustainability is “more likely than not,” based on its technical merits. Delta has developed the probability table shown below of all possible material outcomes ($ in millions): Delta’s taxable income is $85 million for the year. Its effective tax rate is 40%. The tax credit would be a direct reduction in current taxes payable. Required: 1. At what amount would Delta measure the tax benefit in its income statement? 2. Prepare the appropriate journal entry for Delta to record its income taxes for the year.
Solution Summary: The author explains that certain expenses or income bring complexities and different interpretations for reporting income tax expenses. Companies are allowed to reduce expenses only if there is a greater chance that the tax position will be sustained.
Delta Catfish Company has taken a position in its tax return to claim a tax credit of $10 million (direct reduction in taxes payable) and has determined that its sustainability is “more likely than not,” based on its technical merits. Delta has developed the probability table shown below of all possible material outcomes ($ in millions):
Delta’s taxable income is $85 million for the year. Its effective tax rate is 40%. The tax credit would be a direct reduction in current taxes payable.
Required:
1. At what amount would Delta measure the tax benefit in its income statement?
2. Prepare the appropriate journal entry for Delta to record its income taxes for the year.
Definition Definition Method of recording financial transactions in the book of original entry by debiting and crediting the accounts affected by a transaction using the golden rules of accrual accounting.
provide this questions answer for this account subject
Your plant produces 134 snowmobiles per month. Direct costs are $2,540 per snowmobile. The monthly overhead is $87,000. What is the average cost per snowmobile with overhead?
Financial Accounting, Student Value Edition (5th Edition)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Capital Budgeting Introduction & Calculations Step-by-Step -PV, FV, NPV, IRR, Payback, Simple R of R; Author: Accounting Step by Step;https://www.youtube.com/watch?v=hyBw-NnAkHY;License: Standard Youtube License