Question

The Home Depot reported earnings from continuing operations before the provision for income taxes of $6,068 million for the year ending January 29, 2012, in its 10-K. Footnote 6 revealed that the provision for income taxes was $2,185 million and that the current amount paid to the federal, state, and foreign governments was $1,950 million.

1. Compute the earnings from continuing operations after taxes.

2. Prepare the journal entry to record taxes on ordinary activities. Omit explanation.

3. Explain why the amount of income taxes paid to the government was not the same as the amount of income taxes recorded on the income statement.

Answer 1

1. Earnings from continuing operations before taxes= $6068 million

Less; Provision for Income tax- $2185million

Earnings from Continuing operations after tax =$3883

2.i. Profit and loss a/c Dr 2185

To Provision for income tax account a/c 2185

ii. Provision for income tax a/c Dr 1950

To Bank a/c 1950

3. The amount of income taxes recorded on the income statement is an estimate of the tax amount to be paid on the income rpeorted on the financial statements whereas the amount of income tax paid to the governement ius made after the books of accounts have been prpeared and some amount is paid to the government on the basis of own discretion. hence it is not same.