Corning Howell reported taxable income in 2009 of $120 million. At December 31, 2009, the reported amount of some assets and liabilities in the financial statements differed from their tax basis as indicated below:
|
Assets
|
Carrying Amount
|
Tax Basis
|
|
Current
|
|
|
|
Accounts Receivable
|
$ 10 million
|
$ 12 million
|
|
Prepaid insurance
|
20 million
|
$0
|
|
Prepaid rent insurance
|
6 million
|
$0
|
|
Non current
|
|
|
|
Buildings and equipment (net)
|
360 million
|
280 million
|
|
Liabilities
|
|
|
|
Current
|
|
|
|
Liability- subscriptions received
|
14 million
|
0
|
|
Long-term
|
|
|
|
Liability- postretirement benefits
|
594 million
|
0
|
|
Shareholders' Equity
|
|
|
|
Unrealized gain from recording investments
|
4 million
|
0
|
|
Available for sale at fair market value
|
|
|
The total deferred tax asset and deferred tax liability amounts at January 1, 2009, were $250 million and $40 million, respectively. The enacted tax rate is 40 % each year. Required:
1.Determine the total deferred tax asset and deferred tax liability amounts at December 31, 2009.
2.Determine the increase (decrease) in the deferred tax asset and deferred tax liability accounts at December 31, 2009.
3.Determine the income tax payable currently for the year ended December 31, 2009.
4.Prepare the journal entry to record income taxes for 2009.
5.Show how the deferred tax amounts should be classified and reported in the 2009 balance sheet.