Hi, need help with solving a. and b. below (marked with red "x"s). Please show excel calculations if you can. Many thanks.
Adjustments for Deferred Tax Asset Valuation Allowance
Consider the following income tax footnote information for Oracle for the fiscal year ended May 31, 2019 (fiscal year 2019). The following is a geographical breakdown of income before the provision for income taxes:
The provision for income taxes differed from the amount computed by applying the federal statutory rate to our income before provision for income taxes as follows:
The components of our deferred tax assets and liabilities were as follows:
Required
a. Use the four-year average valuation allowance to deferred tax assets (20162019) of 22.55% to adjust the income statement for each of the four years 20162019. Follow Analyst Adjustments 10.3 for guidance in the adjustment process.
Note: Use a negative sign to indicate an income statement reversal.
Note: Do not round until your final answer; round your final answers below to the nearest whole dollar.
b. Adjust the balance sheet for each of the four years 20162019.
Note: Use a negative sign to indicate a decrease of the balance sheet accounts.
Note: Round your answers to the nearest whole dollar.
Year Ended May 31 (in millions) 2019 2018 2017 Domestic $3,774 $3,366 $3,674 Foreign 8,494 9,058 8,006 Income before provision for income taxes $12,268 $12,424 $11,680 The provision for income taxes consisted of the following: Year Ended May 31 ($ in millions) 2019 2018 2017 Current provision: Federal $979 $8,320 $936 State 300 264 257 Foreign 1,097 1,100 1,100 1,475 Total current provision $2,376 $9,684 $2,668 Deferred benefit: Federal $483 $(827) $(158) State (28) (26) (29) Foreign (1,646) 6 (253) Total deferred benefit $(1.191) $(847) $(440) Total provision for income taxes $1,185 $8,837 $2,228 2019 2018 2017 21.096 29.296 35.096 $2,576 $3,629 $4,088 Year Ended May 31 ($ in millions) U.S federal statutory tax rate Tax provision at statutory rate Impact of the Tax Act of 2017: One-time transition tax Deferred tax effects Foreign earnings at other than United States rates State tax expense, net of federal benefit Settlements and releases from judicial decisions and statute expirations, net Domestic production activity deduction Federal research and development credit Stock-based compensation Other, net Total provision for income taxes (529) 7,781 140 (911) (789) (995) (1,312) 197 142 150 (132) (252) (189) (87) (119) (158) (174) (127) (201) (302) (149) 81 6 (114) $1,185 $8,837 $2,228 2019 2018 $541 $567 646 664 322 338 May 31 (in millions) Deferred tax assets: Accruals and allowances Employee compensation and benefits Differences in timing of revenue recognition Basis of property, plant and equipment and intangible assets Tax credit and net operating loss carryforwards Total deferred tax assets Valuation allowance Total deferred tax assets, net Deferred tax liabilities: Unrealized gain on stock Acquired intangible assets GILTI deferred Basis of property, plant and equipment an intangible assets Other Total deferred tax liabilities Net deferred tax assets 1,238 3,717 2,614 6,464 4,183 (1.266) (1,308) 5,198 2,875 (78) (78) (973) (1.254) (1,515) (158) (200) (48) (2.766) (1,538) $2,432 $1,337 $ millions 2016 2017 Total deferred tax asset $6,197 $4,936 Valuation allowance 1,164 1,173 2016 2017 2018 2019 Income Statement Adjustments ($ millions) Income tax expense Net income $ 0 x $ 0 X $ 0X $ OX 0X OX 2016 2017 2018 2019 Ox $ 0X $ 0 Balance Sheet Adjustments ($ millions) Valuation allowance $ Deferred tax assets, net Total assets Retained Earnings 0X $ 0X 0 OX 0 X OX 0 OX OX 0 Year Ended May 31 (in millions) 2019 2018 2017 Domestic $3,774 $3,366 $3,674 Foreign 8,494 9,058 8,006 Income before provision for income taxes $12,268 $12,424 $11,680 The provision for income taxes consisted of the following: Year Ended May 31 ($ in millions) 2019 2018 2017 Current provision: Federal $979 $8,320 $936 State 300 264 257 Foreign 1,097 1,100 1,100 1,475 Total current provision $2,376 $9,684 $2,668 Deferred benefit: Federal $483 $(827) $(158) State (28) (26) (29) Foreign (1,646) 6 (253) Total deferred benefit $(1.191) $(847) $(440) Total provision for income taxes $1,185 $8,837 $2,228 2019 2018 2017 21.096 29.296 35.096 $2,576 $3,629 $4,088 Year Ended May 31 ($ in millions) U.S federal statutory tax rate Tax provision at statutory rate Impact of the Tax Act of 2017: One-time transition tax Deferred tax effects Foreign earnings at other than United States rates State tax expense, net of federal benefit Settlements and releases from judicial decisions and statute expirations, net Domestic production activity deduction Federal research and development credit Stock-based compensation Other, net Total provision for income taxes (529) 7,781 140 (911) (789) (995) (1,312) 197 142 150 (132) (252) (189) (87) (119) (158) (174) (127) (201) (302) (149) 81 6 (114) $1,185 $8,837 $2,228 2019 2018 $541 $567 646 664 322 338 May 31 (in millions) Deferred tax assets: Accruals and allowances Employee compensation and benefits Differences in timing of revenue recognition Basis of property, plant and equipment and intangible assets Tax credit and net operating loss carryforwards Total deferred tax assets Valuation allowance Total deferred tax assets, net Deferred tax liabilities: Unrealized gain on stock Acquired intangible assets GILTI deferred Basis of property, plant and equipment an intangible assets Other Total deferred tax liabilities Net deferred tax assets 1,238 3,717 2,614 6,464 4,183 (1.266) (1,308) 5,198 2,875 (78) (78) (973) (1.254) (1,515) (158) (200) (48) (2.766) (1,538) $2,432 $1,337 $ millions 2016 2017 Total deferred tax asset $6,197 $4,936 Valuation allowance 1,164 1,173 2016 2017 2018 2019 Income Statement Adjustments ($ millions) Income tax expense Net income $ 0 x $ 0 X $ 0X $ OX 0X OX 2016 2017 2018 2019 Ox $ 0X $ 0 Balance Sheet Adjustments ($ millions) Valuation allowance $ Deferred tax assets, net Total assets Retained Earnings 0X $ 0X 0 OX 0 X OX 0 OX OX 0
