In: Accounting
Porpoise acquires 100% of Sunfish in a tax-free business combination. The applicable income tax rate is 30%. Based on the following information about the assets and liabilities of Sunfish, what amount should Porpoise record as a deferred tax balance for this acquisition for purposes of consolidation on the date of acquisition? Enter a minus sign to denote a credit (e.g.-200).
Old book basis | Old tax basis | Fair value | |
Cash | $200,000 | $200,000 | $200,000 |
Equipment, net of depreciation | 1,000,000 | 500,000 | 750,000 |
Patents | 0 | 0 | 3,245,961 |
Accounts payable | (300,000) | (300,000) | (300,000) |
Deferred income taxes payable | (150,000) | NA | ? |
Notes payable | (200,000) | (200,000) | (230,000) |
Old book basis | Old tax basis | Fair value | Temporary difference | |||
Cash | 200,000 | 200,000 | 200,000 | - | ||
Equipment, net of depreciation | 1,000,000 | 500,000 | 750,000 | (250,000) | DTL | |
Patents | - | - | 3,245,961 | (3,245,961) | DTL | |
Accounts payable | (300,000) | (300,000) | (300,000) | |||
Deferred income taxes payable | (150,000) | NA | ? | |||
Notes payable | (200,000) | (200,000) | (230,000) | 30,000 | DTA | |
Net taxable temporary difference | (3,465,961) | |||||
DTL @30% | 1,039,788 | 3465961*30% | ||||
deferred tax balance | 1,039,788 |