Question
Recording Income Tax Expense Nike, Inc., reports the following tax information in the notes to its 2018 financial report. Income before income taxes is as
Recording Income Tax Expense
Nike, Inc., reports the following tax information in the notes to its 2018 financial report. Income before income taxes is as follows:
Year Ended May 31 (In millions) | 2018 | 2017 | 2016 |
---|---|---|---|
Income before income taxes: | |||
United States | $744 | $1,240 | $956 |
Foreign | 3,581 | 3,646 | 3,667 |
$4,325 | $4,886 | $4,623 |
The provision for income taxes is as follows:
Year Ended May 31 (In millions) | 2018 | 2017 | 2016 |
---|---|---|---|
Current: | |||
United States | |||
Federal | $1,167 | $398 | $304 |
State | 45 | 82 | 71 |
Foreign | 533 | 439 | 568 |
1,745 | 919 | 943 | |
Deferred: | |||
United States | |||
Federal | 595 | (279) | (57) |
State | 25 | (9) | (16) |
Foreign | 27 | 15 | (7) |
647 | (273) | (80) | |
$2,392 | $646 | $863 |
Nike also states the following:
The effective tax rate for the year ended May 31, 2018 was higher than the effective tax rate for the year ended May 31, 2017 primarily due to the enactment of the Tax Act, which included provisional expense of $1,875 million for the one-time transition tax on the deemed repatriation of undistributed foreign earnings, and $158 million due to the remeasurement of deferred tax assets and liabilities
Required a. Record Nike's provision for income taxes for 2018 using the financial statement effects template.
Enter answers in millions in the appropriate account columns,using the second row only if additional space is needed. Use a negative sign with answers, when appropriate.
Balance Sheet | Income Statement | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Transaction | Cash Asset | + | Noncash Asset | = | Liabilities | + | Contrib. Capital | + | Earned Capital | Revenues | - | Expenses | = | Net Income |
To record income tax expense | Answer | + | Answer | = | $1,745 | + | Answer | + | Answer | Answer | - | Answer | = | Answer |
Answer | + | Answer | = | Answer | + | Answer | + | Answer | Answer | - | Answer | = | Answer |
b. Record Nike's provision for income taxes for 2018 (in millions) using journal entries.
General Journal | |||
---|---|---|---|
Description | Debit | Credit | |
AnswerDeferred income taxesIncome taxes payableIncome tax expense | Answer | Answer | |
Income taxes payable | Answer | Answer | |
AnswerDeferred income taxesIncome taxes payableIncome tax expense | Answer | Answer |
c. Explain how the provision for income taxes affects Nike's financial statements.
Net income | AnswerIncreasedDecreasedNo change | by | Answer | million |
Liabilities | AnswerIncreasedDecreasedNo change | by | Answer | million |
d. Calculate and compare Nike's effective tax rate for 2018, 2017, and 2016. Round to one decimal place.
2018 | Answer |
2017 | Answer |
2016 | Answer |
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