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Woodruff, Inc. reported the following Accounting Income (GAAP) for 2019 and 2020 ($ in millions): Revenues Expenses Accounting (book) income 2019 800 650 150 2020
Woodruff, Inc. reported the following Accounting Income (GAAP) for 2019 and 2020 ($ in millions): Revenues Expenses Accounting (book) income 2019 800 650 150 2020 950 720 230 Tax rate: 30% 1. Expenses each year include $20 million from a two-year casualty insurance policy purchased in 2019 for $40 million. The cost is tax deductible when paid. 2. Expenses include $3 million insurance premiums each year for life insurance on key executives. 3. 2019 expenses included a $15 million unrealized loss from reducing investments (classified as trading securities) to fair value. The investments were sold in 2020 at a loss of $15 million. 4. During 2018, accounting income included an estimated loss of $8 million from having accrued a loss contingency. The loss was paid in 2019 at which time it is tax deductible. 5. On January 1, 2016, Woodruff purchased a building for $36 million. Woodruff uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, 2018, the book value of the building was $30 million and its tax basis was $20 million. At December 31, 2019, the book value of the building was $28 million and its tax basis was $13 million. 6. At January 1, 2019, Woodruff had a deferred tax asset of $6 million and a deferred tax liability of $3 million. Required: a) Determine the total deferred tax asset and deferred tax liability amounts at December 31, 2019. b) Determine the income tax payable for the year ended December 31, 2019. c) Prepare the entire journal entry to record income taxes for 2019. d) Show how the deferred tax amounts should be classified and reported in the 2019 balance sheet. Woodruff, Inc. reported the following Accounting Income (GAAP) for 2019 and 2020 ($ in millions): Revenues Expenses Accounting (book) income 2019 800 650 150 2020 950 720 230 Tax rate: 30% 1. Expenses each year include $20 million from a two-year casualty insurance policy purchased in 2019 for $40 million. The cost is tax deductible when paid. 2. Expenses include $3 million insurance premiums each year for life insurance on key executives. 3. 2019 expenses included a $15 million unrealized loss from reducing investments (classified as trading securities) to fair value. The investments were sold in 2020 at a loss of $15 million. 4. During 2018, accounting income included an estimated loss of $8 million from having accrued a loss contingency. The loss was paid in 2019 at which time it is tax deductible. 5. On January 1, 2016, Woodruff purchased a building for $36 million. Woodruff uses straight-line depreciation for financial statement reporting and MACRS for income tax reporting. At December 31, 2018, the book value of the building was $30 million and its tax basis was $20 million. At December 31, 2019, the book value of the building was $28 million and its tax basis was $13 million. 6. At January 1, 2019, Woodruff had a deferred tax asset of $6 million and a deferred tax liability of $3 million. Required: a) Determine the total deferred tax asset and deferred tax liability amounts at December 31, 2019. b) Determine the income tax payable for the year ended December 31, 2019. c) Prepare the entire journal entry to record income taxes for 2019. d) Show how the deferred tax amounts should be classified and reported in the 2019 balance sheet
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