Question

Check my work Delta Catfish Company has taken a position in its tax return to claim a tax credit of $30 million (direct reduction in taxes payable) and has determined that its sustainability is "more likely than not," based on its technical merits. Delta has developed the probability table shown below of all possible material outcomes: $30 $24.0 $18.0 $12.0 10& 20& 25% 208 Delta's taxable income is $105 million for the year. Its effective tax rate is 40%. The tax credit would be a direct reduction in current taxes payable. Hint Print References Required: 1. At what amount would Delta measure the tax benefit in its income statement? 2. Prepare the appropriate journal entry for Delta to record its income taxes for the year Complete this question by entering your answers in the tabs below. At what amount would Delta measure the tax benefit in its income statement? (Enter your answer in millons and round your answer to 1 decimal places.) < Prev 11 of 12 Next > E-mail Your Results

Answer 1

1) Amount of tax benefit that management expect 30 10% 10 24 20% 30 18 25% 12 20% 75 6 25% 100 % likelihood that tax benefit will sustained Cummulative Probability $18 million is the amount of tax benefit that would be recognized in the financial statements It represents the largest amount of benefit that is more than 50 percent likely to be the end result 2) General Journal Debit Credit Income tax Expense (105+40%)-18 24 Income tax Payable Liability (105+40%)-30 12 12