Question

The information that follows pertains to Richards Refrigeration, Inc.: a. At December 31, 2018, temporary differences existed between the financial statement carrying amounts and the tax bases of the following: ($ in millions) Future Taxable Carrying Tax (Deductible) Amount Basis Amount $128 $94 $ 34 54 0 54 29 0 (29) Buildings and equipment (net of accumulated depreciation) Prepaid insurance Liability-loss contingency b. No temporary differences existed at the beginning of 2018. c. Pretax accounting income was $204 million and taxable income was $145 million for the year ended December 31, 2018. The tax rate is 40%. Required: 1. Complete the following table given below and prepare the appropriate journal entry to record income taxes for 2018 2. What is the 2018 net income? Complete this question by entering your answers in the tabs below. Required 1 Calculation Required 1 G) Required 2 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.) Tax Rate % Tax $ Recorded as: ($ in millions) $ 204.0 Pretax accounting income Permanent differences Income subject to taxation X Temporary Differences Depreciation х Prepaid insurance х = х = Liability - loss contingency Income taxable in current year х =

• Required 1 GJ: Record 2018 income taxes.
• Required 2: What is the 2018 net income? (Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

Answer 1

ANSWER:

Requirement 1

($ in millions)

Income tax expense (to balance)                                                         88

Deferred tax asset ($29 million x 40%)                                              11.6

Deferred tax liability ($88 million x 40%)   35.2

Income tax payable ($145 million x 40%) 58

Requirement 2

($ in millions)

Income before income tax                                                                  $204

Income tax expense                                                                             (88)

Net income                                                                                          $116