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 Nikes 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		+		=	$1,745	+		+			-		=
		+		=		+		+			-		=

b. Record Nike's provision for income taxes for 2018 (in millions) using journal entries.

General Journal
Description		Debit	Credit
	Deferred income taxesIncome taxes payableIncome tax expense
	Income taxes payable
	Deferred income taxesIncome taxes payableIncome tax expense

c. Explain how the provision for income taxes affects Nikes financial statements.

Net income	IncreasedDecreasedNo change	by		million
Liabilities	IncreasedDecreasedNo change	by		million

d. Calculate and compare Nikes effective tax rate for 2018, 2017, and 2016. Round to one decimal place.

2018
2017
2016