In: Accounting
Corning-Howell reported taxable income in 2021 of $200 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 | $ | 88 | million | $ | 92 | million | ||
Prepaid insurance | 100 | million | 0 | |||||
Prepaid advertising | 84 | million | 0 | |||||
Noncurrent | ||||||||
Investments in equity securities (fair value)* | 84 | million | 0 | |||||
Buildings and equipment (net) | 440 | million | 360 | million | ||||
Liabilities | ||||||||
Current | ||||||||
Deferred subscription revenue | 92 | million | 0 | |||||
Long-term | ||||||||
Liability—compensated future absences | 674 | 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 $196.25 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.