Question

Taft Corporation uses the equity method to account for its 25% investment in Flame, Inc., which it made on January 1, 2014. During 2014, Taft received dividends of $30,000 from Flame and recorded $180,000 as its equity in Flame’s earnings. Additional information follows:
• All Flame’s undistributed earnings will be distributed as dividends in future periods.
• The dividends received from Flame are eligible for the 80% dividends received deduction.
• Flame has no other temporary differences.
• Enacted income tax rates are 30% for 2014 and thereafter.

Required:
In its December 31, 2014, balance sheet, what amount should Taft report for deferred income tax liability related to its investment in Flame?



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  • CreatedSeptember 10, 2014
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