On December 31, 2020, Lexxus Inc. recorded an unrealized gain in income of $10,000 related to its trading debt securities originally purchased on December 15, 2020, for $40,000. Lexxus recognized pretax GAAP income of $160,000 in 2020 and had a tax rate of 25%.

a. Determine the reported amount of trading securities in the financial statements of Lexxus on December 30, 2020.

Trading securities (GAAP basis)

Answer

b. Determine the tax basis of the trading securities on December 30, 2020.

Trading securities (tax basis)

Answer

c. Calculate the deferred tax balance and show how it would be reported in the December 31, 2020, balance sheet of Lexxus.

Balance Sheet, Dec. 31	2020
	Answer