Question

Exercise 19-17 William McDowell Co, establishes a $110,000,000 liability at the end of 2020 for the estimated site-cleanup costs at two of its manufacturing facilities. All related closing costs will be paid and deducted on the tax return in 2021. Also, at the end of 2020, the company has $55,000,000 of temporary differences due to excess depreciation for tax purposes, $7,700,000 of which will reverse in 2021. The enacted tax rate for all years is 20%, and the company pays taxes of $35,200,000 on $176,000,000 of taxable income in 2020. McDowell expects to have taxable income in 2021. Your answer is correct. Determine the deferred taxes to be reported at the end of 2020. Deferred tax assets Deferred tax liabilities 22000000 11000000 SHOW LIST OF ACCOUNTS SHOW SOLUTION SHOW ANSWER LINK TO TEXT LINK TO TEXT Your answer is correct. Indicate how the deferred taxes computed above are to be reported on the balance sheet. William McDowell Co. Balance Sheet (Partial) December 31, 2020 Non-current Asset Deferred Tax Asset 11000000 SHOW ANSWER SHOW LIST OF ACCOUNTS SHOW SOLUTION LINK TO TEXT LINK TO TEXT

Answer 1

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Answer: Encome Statement Partial) For the year ended Dec 31,2020 Income before income taxy $93,500 000 Income tax expense! Current |$35,200,000 Deferred, Net $16500,000 (22,000,000 C1000,000 - 5,500,000 | Net income foss) $18,700,000 $74800,000 Working Notes - Taxable income $176,000,000 Less: Temporary Difference -liability (Diferred tax Asset $10,000,000) Addis Excess Temporary difference Deprecialwn) (OTL) $27500000 Income before Income taxy $93,500,000 Temporary difference of beginning DIL 18,500,000/01) $27,500,000 Temporary difference of ending DTL $55,000,000 $27,500000 Ewes Teuporary difference