Terry Corporation reported fair values for its minority-passive equity investment portfolio at the last four year-ends as
Question:
Terry Corporation reported fair values for its minority-passive equity investment portfolio at the last four year-ends as shown in the table below. The company did not buy or sell any investments in 20X1, 20X2, or 20X3. No dividends are paid on any of the securities in the portfolio. The aggregate cost of the securities in the portfolio is $290,000. The corporate tax rate is 21%.
Required:
1. What amount of deferred tax asset or deferred tax liability does Terry report at December 31, 20X0, related to its portfolio?
2. Prepare the journal entries used to record the income tax effects of the portfolio in 20X1, 20X2, and 20X3. Assume Terry has substantial income from other sources and therefore no valuation allowance.
3. Suppose Terry sells its investment in Myra Company common stock during 20X4 for $85,000. The investment had cost Terry $60,000 and had a fair value at December 31, 20X3, of $82,000. Prepare the journal entry to record the income tax effect of the sale.
Transcribed Image Text:
20х0 20X1 20X2 20х3 Fair value of portfolio at December 31 $325,000 $320,000 $285,000 $337,000
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Requirement 1 20X0 20X1 20X2 20X3 Portfolio fair value at December 31 325000 320000 285000 337000 Ta...View the full answer
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