Uncertain Tax Position, Disclosure. Assume that Kenne Diagnostics, Inc. makes an $ 800,000 capital investment and elects
Question:
Based on an analysis of prior tax cases, the most likely sustainable position would be to use MACRS depreciation for five- year property resulting in a first- year depreciation expense of $ 160,000 ( i. e., 20% × $ 800,000). The entity reports $ 1,960,000 of income before tax and depreciation (or taking any Section 179 deductions) and is subject to a 40% tax rate. Managements’ analysis of the likelihood of sustainability of this deduction under examination by the taxing authorities is presented on the next page.
“As Filed” Amount of the Tax% Likelihood That the Tax
Benefit That Management Position Will Be
Expects to Sustain Sustained at This Level
$ 800,000 …………………………………….5%
$ 340,000 …………………………………….30%
$ 160,000 …………………………………….20%
$ 110,000 …………………………………….45%
Required
a. Prepare the journal entry to record the tax provision for the current year.
b. Kenne’s unrecognized tax benefits at the beginning of the year amounted to $ 120,000. Of this amount, $ 44,500 was settled during the year. Based on this information, prepare the roll forward reconciliation for Kenne’s unrecognized tax benefits.
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Related Book For
Intermediate Accounting
ISBN: 978-0132162302
1st edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
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