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klemol [59]
3 years ago
11

Edward McDowell Co. establishes a $138,000,000 liability at the end of 2020 for the estimated site-cleanup costs at two of its m

anufacturing 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 $69,000,000 of temporary differences due to excess depreciation for tax purposes, $9,660,000 of which will reverse in 2021. The enacted tax rate for all years is 20%, and the company pays taxes of $44,160,000 on $220,800,000 of taxable income in 2020. McDowell expects to have taxable income in 2021.
Determine the deferred taxes to be reported at the end of 2020.
Business
1 answer:
grin007 [14]3 years ago
4 0

Answer:

The answer is given below;

Explanation:

Site-cleanup costs    $138,000,000

This will give rise to deferred tax asset of $138,000,000*20%=$27,600,000

Tax Depreciation excessive for the year=$9,660,000

Excess tax depreciation deducted in current year will give rise to deferred tax liability=$9,660,000*20%=$1,932,000

Current Tax Expense =$44,160,000

Deferred Tax During 2020 are;

Deferred Tax Asset   $9,660,000

Deferred Tax Liability $1,932,000

Current Tax Expense  $44,160,000

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