Delta Catfish Company has taken a position in its tax return to claim a tax credit of $20 million (direct reduction in taxes payable) and has determined that its sustainability is "more likely than not," based on its technical merits. Delta has developed the probability table shown below of all possible material outcomes: Probability Table ($ in millions) Amount of the tax benefit that management expects to receive Percentage likelihood that the tax benefit will be sustained at this level $20 $20 $18 $6 $4 10% 20% 25% 20% 25% Delta's taxable income is $88 million for the year. Its effective tax rate is 25%. The tax credit would be a direct reduction in current taxes payable. Required: 1. At what amount would Delta measure the tax benefit in its income statement? 2. Prepare the appropriate journal entry for Delta to record its income taxes for the year.

Delta Catfish Company has taken a position in its tax return to claim a tax credit of $20 million (direct reduction in taxes payable) and has determined that its sustainability is "more likely than not," based on its technical merits. Delta has developed the probability table shown below of all possible material outcomes: Probability Table ($ in millions) Amount of the tax benefit that management expects to receive Percentage likelihood that the tax benefit will be sustained at this level $20 $20 $18 $6 $4 10% 20% 25% 20% 25% Delta's taxable income is $88 million for the year. Its effective tax rate is 25%. The tax credit would be a direct reduction in current taxes payable. Required: 1. At what amount would Delta measure the tax benefit in its income statement? 2. Prepare the appropriate journal entry for Delta to record its income taxes for the year.

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter6: Accounting For Financial Management

Section: Chapter Questions

Problem 3P

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