Question
Red Hat Inc, has taken a position in its 2018 tax return and claims that it will save the company $10 million (direct reduction of
Red Hat Inc, has taken a position in its 2018 tax return and claims that it will save the company $10 million (direct reduction of current tax payment). Red Hat Inc, has determined that its sustainability is more likely that not, based on the claims technical merits (i.e. probable to uphold some of its benefits position) Managements estimate of likelihood of various amounts of benefits are:
Amount of tax benefits to be sustained $10 $9 $8 $7
Percentage likelihood 10% 25% 20% 45%
Assume that Red Hat had determined that the sustainability of the tax benefits was not more likely that not (I.e., assume Step 1 had failed and Red Hat would not uphold its position) Red Hats initial journal entry would include a:
A) Credit to unrecognized Tax benefits for $2
B) Debit income tax payable for $24
C) Credit to income tax payable for $24
D) Debit to income tax expense for $16
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started