Ask Question
13 April, 15:29

Marc, Inc., owns 70 percent of SRS Company. During the current year, SRS reported net income of $515,000 but paid a total cash dividend of only $105,000. What deferred income tax liability must be recognized in the consolidated balance sheet? Assume the tax rate is 40 percent.

+1
Answers (1)
  1. 13 April, 18:59
    0
    The deferred income tax liability that must be recognized in the consolidated balance sheet is $186960.

    Explanation:

    undistributed income = SRS reported net income - paid dividends

    = $515,000 - $105,000

    = $410000

    share of Marc, inc = 70%*$410000 = $287000

    taxable income = undistributed income + share of Marc, inc - non taxable portion

    = $410000 + $287000 - 80%*287000

    = $410000 + $287000 - $229600

    = $467400

    since the tax rate is 40%, the deferred income tax payable is

    40%*$467400 = $186960

    Therefore, the deferred income tax liability that must be recognized in the consolidated balance sheet is $186960.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Marc, Inc., owns 70 percent of SRS Company. During the current year, SRS reported net income of $515,000 but paid a total cash dividend of ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers