Delta Catfish Company has taken a position in its tax return to claim a tax credit...
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Delta Catfish Company has taken a position in its tax return to claim a tax credit of $200 million (direct reduction in taxes payable) and has determined that its sustainability is "more likely than not," based on its technical merits. Delta has developed the probability table shown below of all possible material outcomes: Probability Table ($ in millions) Amount of the tax benefit that management expects to receive $200 $200 $198 $186 $184 Percentage likelihood that the tax benefit will be sustained at this level 10% 20% 25% 20% 25% Delta's taxable income is $872 million for the year. Its effective tax rate is 25%. The tax credit would be a direct reduction in current taxes payable. Required: 1. At what amount would Delta measure the tax benefit in its income statement? 2. Prepare the appropriate journal entry for Delta to record its income taxes for the year. Delta Catfish Company has taken a position in its tax return to claim a tax credit of $200 million (direct reduction in taxes payable) and has determined that its sustainability is "more likely than not," based on its technical merits. Delta has developed the probability table shown below of all possible material outcomes: Probability Table ($ in millions) Amount of the tax benefit that management expects to receive $200 $200 $198 $186 $184 Percentage likelihood that the tax benefit will be sustained at this level 10% 20% 25% 20% 25% Delta's taxable income is $872 million for the year. Its effective tax rate is 25%. The tax credit would be a direct reduction in current taxes payable. Required: 1. At what amount would Delta measure the tax benefit in its income statement? 2. Prepare the appropriate journal entry for Delta to record its income taxes for the year.
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Answer rating: 100% (QA)
1 Taxable Income millions A 872 872 872 872 872 Tax 25 millions B 218 218 218 218 218 L... View the full answer
Related Book For
Intermediate Accounting
ISBN: 978-0077400163
6th edition
Authors: J. David Spiceland, James Sepe, Mark Nelson
Posted Date:
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