Question

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.
  

Answer 1