9th Edition

ISBN: 9781260255775

Author: SPICELAND, Nel

Publisher: MCG

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Chapter 16, Problem 16.9P

Determine deferred tax assets and liabilities

• LO16–6

Corning-Howell reported taxable income in 2018 of $120 million. At December 31, 2018, the reported amount of some assets and liabilities in the financial statements differed from their tax bases as indicated below:

Chapter 16, Problem 16.9P, Determine deferred tax assets and liabilities LO166 Corning-Howell reported taxable income in 2018

The total deferred tax asset and deferred tax liability amounts at January 1, 2018, were $250 million and $40 million, respectively. The enacted tax rate is 40% each year.

Required:

1. Determine the total deferred tax asset and deferred tax liability amounts at December 31, 2018.

2. Determine the increase (decrease) in the deferred tax asset and deferred tax liability accounts at December 31, 2018.

3. Determine the income tax payable currently for the year ended December 31, 2018.

4. Prepare the journal entry to record income taxes for 2018.

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Chapter 16, Problem 16.8P

Chapter 16, Problem 16.10P

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JH, Inc., is a calendar year, accrual basis corporation with Joe as its sole shareholder (basis in his stock is $90,000). On January 1 of the current year, JH Corporation has accumulated E & P of $200,000. Before considering the effect of the distribution described below, the corporation’s current E & P is $50,000. On November 1, JH distributes an office building to Joe. The office building has an adjusted basis of $80,000 (fair market value of $100,000) and is subject to a mortgage of $110,000. Assume that the building has been depreciated using the ADS method for both income tax and E & P purposes. What are the tax consequences of the distribution to JH and to Joe? (In your answer, be sure to describe the effects on taxable income for both JH and Joe, the impact of the distribution on JH’s E & P, and Joe’s basis in the building.)

Joe is the sole shareholder of JH Corporation. Joe sold his stock to Ethan on October 31 for $150,000. Joe’s basis in JH stock was $50,000 at the start of the year. JH distributed land to Joe immediately before the sale. JH’s basis in the land was $20,000 (fair market value of $25,000). On December 31, Ethan received a $75,000 cash distribution from JH. During the year, JH has $20,000 of current E & P and its accumulated E & P balance on January 1 is $10,000. Which of the following statements is true? a. Joe recognizes a $110,000 gain on the sale of his stock. b. Joe recognizes a $100,000 gain on the sale of his stock. c. Ethan receives $5,000 of dividend income.d. Joe receives $20,000 of dividend income. e. None of the above.

Chapter 16 Solutions

SPICELAND GEN CMB LL INTRM ACCTG; CNCT

Ch. 16 - Prob. 16.1Q Ch. 16 - A deferred tax liability (or asset) is described...Ch. 16 - Prob. 16.3Q Ch. 16 - Prob. 16.4Q Ch. 16 - Temporary differences result in future taxable or...Ch. 16 - Identify three examples of differences with no...Ch. 16 - The income tax rate for Hudson Refinery has been...Ch. 16 - Suppose a tax reform bill is enacted that causes...Ch. 16 - A net operating loss occurs when tax-deductible...Ch. 16 - Prob. 16.10Q

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Solution Summary: The author explains that deferred tax is an amount i.e. computed on the basis of tax liability on income as per income statement.

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