Business, 24.03.2020 21:15 bartam833oz4qy6

James McDowell Co. establishes a $102,000,000 liability at the end of 2020 for the estimated site-cleanup costs at two of its manufacturing facilities. All related closing costs will be paid and deducted on the tax return in 2021. Also, at the end of 2020, the company has $51,000,000 of temporary differences due to excess depreciation for tax purposes, $7 million of which will reverse in 2018. The enacted tax rate for all years is 40%, and the company pays taxes of $160 million of taxable income in 2017. McDowell expects to have taxable inome in 2018.

a. Determine the deferred taxes to be reported at the end of 2017.
b. Indicate how the deferred taxes computed in (a) are to be reported on the balance sheet.
c. Assuming that the only deferred tax account at the beginning of 2017 was a deferred tax liability of $10,000,000, draft the income tax expense portion of the income statement for 2017, beginning with the line "Inconme before income taxes."

Answers: 3

Show answers

Answers

Answer from: wehack523

Task a:

Deferred tax asset = $40,800,000

Deferred tax liability = $20,400,000

Task b:

Indicate how the deferred taxes computed in (a) are to be reported on the balance sheet.

Note: Please see the attachments for the balance sheet*

Task c:

Assuming that the only deferred tax account at the beginning of 2017 was a deferred tax liability of $10,000,000, draft the income tax expense portion of the income statement for 2017, beginning with the line "Income before income taxes."

Please see the attachments for the Income statement*

Explanation:

Task a:

Determine the deferred taxes to be reported at the end of 2017.

Deferred tax asset

Deferred tax asset = $102,000,000 × 40%

Deferred tax asset = $40,800,000 (answer)

Deferred tax liability

Deferred tax liability = $51,000,000 × 40%

Deferred tax liability = $20,400,000 (answer)

Task b:

Indicate how the deferred taxes computed in (a) are to be reported on the balance sheet.

Explanation:

Deferred tax asset

When income tax expense is smaller than income tax payable as a result of deducting any non-cash expenses in accounting books, some income tax expense is deferred to the future. The larger income tax payable on tax returns creates a deferred tax asset, which companies can use to pay for deferred income tax expense in the future. Deferred tax assets may be presented as current assets if a temporary difference between accounting income and taxable income is reconciled the following year.

Deferred tax liability

When income tax expense is greater than income tax payable as a result of no recognition of any noncash revenues in tax returns, some income payable is deferred to the future. The smaller income tax payable on tax returns creates a deferred tax liability, which companies must meet by paying any deferred income tax payable in the future. Deferred liabilities may be presented as current liabilities if a temporary difference between accounting income and taxable income is reconciled the following year.

Note: The balance sheet extract is attached:

Task c:

Note: The income statement extract is attached:

Note: The relevant working also attached

James McDowell Co. establishes a $102,000,000 liability at the end of 2020 for the estimated site-cl

Answer from: Quest

hi,

henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi

Answer from: Quest

the correct answer is b.)

Another question on Business

Business, 21.06.2019 21:30

1. gar principles or "the principles"are intended to do what? a. foster an awareness of the hierarchical structure of the organization b. explain the best method of implementing biometric security techniques c. foster an awareness of the importance of good employee training d. foster an awareness of getting upper level management on board in understanding the need to implement an ig program e. foster an awareness of good record keeping principles

Answers: 1

Answer

Business, 22.06.2019 11:30

Which of the following is not an example of one of the four mail advantages of prices on a free market economy

Answers: 1

Answer

Business, 22.06.2019 13:40

The cook corporation has two divisions--east and west. the divisions have the following revenues and expenses: east west sales $ 603,000 $ 506,000 variable costs 231,000 300,000 traceable fixed costs 151,500 192,000 allocated common corporate costs 128,600 156,000 net operating income (loss) $ 91,900 $ (142,000 ) the management of cook is considering the elimination of the west division. if the west division were eliminated, its traceable fixed costs could be avoided. total common corporate costs would be unaffected by this decision. given these data, the elimination of the west division would result in an overall company net operating income (loss)

Answers: 1

Answer

Business, 22.06.2019 20:00

Miller mfg. is analyzing a proposed project. the company expects to sell 14,300 units, plus or minus 3 percent. the expected variable cost per unit is $15 and the expected fixed cost is $35,000. the fixed and variable cost estimates are considered accurate within a plus or minus 3 percent range. the depreciation expense is $32,000. the tax rate is 34 percent. the sale price is estimated at $19 a unit, give or take 3 percent. what is the net income under the worst case scenario?

Answers: 2

Answer

You know the right answer?

James McDowell Co. establishes a $102,000,000 liability at the end of 2020 for the estimated site-cl...

Questions