9th Edition

ISBN: 9781260216141

Author: SPICELAND

Publisher: MCG CUSTOM

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Chapter 16, Problem 1CCTC

Target Case

• LO16-1, LO16-2, LO16-4, LO16-8, LO16-9

Real World Financials

Target Corporation prepares its financial statements according to U.S. GAAP. Target’s financial statements and disclosure notes for the year ended January 30, 2016, are available in Connect. This material also is available under the Investor Relations link at the company’s website (www.target.com).

Required:

1. From the income statement, determine the income tax expense for the most recent year. Tie that number to the second table in disclosure Note 23, “Provision for Income Taxes,” and prepare a summary journal entry that records Target’s tax expense from continuing operations for the year ended January 30, 2016.

2. Focusing on the third table in disclosure Note 23, “Net Deferred Tax Asset/(Liability),” calculate the change in net deferred tax assets or liability. By how much did that amount change? To what extent did you account for that change in the journal entry you wrote for the first requirement of this case? List possible causes of any difference.

3. Target’s Note 23 indicates that “We have not recorded deferred taxes when earnings from foreign operations are considered to be indefinitely invested outside the U.S. These accumulated net earnings relate to certain ongoing operations and were $685 million at January 30, 2016, and $328 million at January 31, 2015.” Are these amounts treated as temporary or permanent differences by Target? If Target decides to repatriate earnings in the future, what will be the effect on net income in the year of the repatriation?

4. What is Target’s liability for unrecognized tax benefits as of January 30, 2016? If Target were to prevail in court and realize $50 million more in tax savings than it thought more likely than not to occur, what would be the effect on the liability for unrecognized tax benefits and on net income?

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Chapter 16, Problem 16.12BYP

Chapter 16, Problem 1CCIFRS

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Chapter 16 Solutions

INTERMEDIATE ACCOUNTING(LL)-W/CONNECT

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 the deferred tax account shows the amount of reconciliation due to the difference between the income tax expense account and the Income Tax Payable account.

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