The information that follows pertains to Richards Refrigeration, Inc.: At Decemb
ID: 2518909 • Letter: T
Question
The information that follows pertains to Richards Refrigeration, Inc.:
At December 31, 2018, temporary differences existed between the financial statement carrying amounts and the tax bases of the following:
No temporary differences existed at the beginning of 2018.
Pretax accounting income was $210 million and taxable income was $145 million for the year ended December 31, 2018. The tax rate is 30%.
Required:
1. Complete the following table given below and prepare the appropriate journal entry to record income taxes for 2018
Complete the following table given below to record income taxes for 2018. (Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5). Negative amounts should be entered with a minus sign.)
Record 2018 Income Taxes
2. What is the 2018 net income?
Amount Tax
Basis Future Taxable
(Deductible)
Amount Buildings and equipment (net of accumulated depreciation) $ 140 $ 100 $ 40 Prepaid insurance 60 0 60 Liability—loss contingency 35 0 (35 )
Explanation / Answer
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Part-1 $ in Million * Tax Rate % = Tax $ Recorded as Pretax accounting Income 210 Permanent Difference 0 Income Subject to taxation 210 * 30% = 63 Income Tax Expense Temporary Difference: Depreciation -40 * 30% = 12 Deferred Tax Liability Prepaid Insurance -60 * 30% = 18 Deferred Tax Liability Liability-Contingent Loss 35 * 30% = 10.5 Deferred Tax Asset Income Taxable in current year 145 * 30% = 43.5 Income Tax Payable Journal Entry: Debit Credit Income Tax Expense 63 Deferred Tax Asset 10.5 Deferred Tax Liability 30 Income Tax Payable 43.5 Part-2 2018 Net Income Pretax Income 210 Less: Income Tax 30% 63 Net Income 147Related Questions
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