Question

Corning-Howell reported taxable income in 2018 of $220 million. At December 31, 2018, the reported amount of some assets and liabilities in the financial statements differed from their tax bases as indicated below:

carrying amt tax basis

Current
Net accounts receivable	$	13	million		$	18	million
Prepaid insurance		42	million			0
Prepaid advertising		6	million			0
Noncurrent
Investments at fair value with changes in OCI*		7	million			0
Buildings and equipment (net)		420	million			350	million
Liabilities
Current
Liability—subscriptions received		20	million			0
Long-term
Liability—postretirement benefits		620	million			0

*Gains and losses taxable when investments are sold.

The total deferred tax asset and deferred tax liability amounts at January 1, 2018, were $260 million and $45 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, 2018.
2. Determine the increase (decrease) in the deferred tax asset and deferred tax liability accounts at December 31, 2018.
3. Determine the income tax payable currently for the year ended December 31, 2018.
4. Prepare the journal entry to record income taxes for 2018.

Answer 1