The information that follows pertains to Richards Refrigeration, Inc.: a. At Dec

Question

The information that follows pertains to Richards Refrigeration, Inc.: a. At December 31, 2016, temporary differences existed between the financial statement carrying amounts and the tax bases of the following: ($ in millions) Future Taxable Carrying Amount $148 Tax (Deductible) Basis $104 0 0 Amount $ 44 Buildings and equipment (net of accumulated depreciation) Prepaid insurance Liability-oss contingency 64 39 64 (39) b. No temporary differences existed at the beginning of 2016 c. Pretax accounting income was $214 million and taxable income was $145 million for the year ended December 31, 2016. The tax rate is 35% Required: 1. Complete the following table given below and prepare the appropriate journal entry to record income taxes for 2016. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Negative amounts should be entered with a minus sign. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5)) Tax $ ($ in millions) 214.0 x Tax Rate % Recorded as: Pretax accounting income Permanent differences Income subiect to taxation 214.0x 0.0 Temporary Differences Income taxable in current year 214.0 x

Explanation / Answer

Richards Refrigeration Inc. $ in Millions * Tax Rate= Tax Recorded as Pretax Accounting Income $         214.00 Permanent difference No Permanent difference Income Subject to Taxation $         214.00 35% $214*35%=74.9 Income Tax Expense Temorary Differences Depreciation $         (44.00) 35% $44*35%=$15.4 Deferred Tax Liability Prepaid Insurance $         (64.00) 35% $64*35%=$22.4 Deferred Tax Liability Liability-loss contingency $           39.00 35% $39*35%=$13.65 Deferred Tax Assets Income Taxable in current Year $         145.00 35% $145*35%=$50.75 Income Tax General Journal Particular Amount (Dr) Amount (Cr) Income Tax Expense $           74.90 Deferred Tax Assets $           13.65    To Deferred Tax Liability=($15.4+$22.4) $            37.80    To Income Tax Payable $            50.75 Net Income for 2016 Amt in million Net Income $         214.00 Less: Income Tax Expense $           74.90 Net Income for 2016 $         139.10

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