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29 December, 02:21

On December 31, Year 1, a publicly traded entity identified a tax position that will result in a $100,000 tax benefit that qualifies for measurement and should be recognized. The entity has considered the amounts and possible outcomes of the position being sustained upon examination as follows:Possible individual cumulative estimated probability of probability of outcome occurring occurring$100,000 20% 20%$30,000 35% 55%$10,000 45% 100% 100%What amount should be recognized as the tax benefit as of december 31, year 1? a.$0b.$10,000c.$30,000d.$100,000

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  1. 29 December, 02:56
    0
    The correct answer is $30,000

    Explanation:

    If we refer back to the question asked, we can see that the tax positions that are announced are uncertain hence the entity cumulatively attains a 55% chance of receiving at least a $30,000 tax benefit and therefore, it can be recognized for the amount that has a cumulative likelihood of being upheld at over 50%.

    Consequentially, $30,000 is the appropriate amount to recognize.

    However, to further clarify the case, we can also say that in a situation where the 50% threshold is met at $30,000 the firm can also agree to recognize the 30,000 tax benefit.
  2. 29 December, 04:29
    0
    C $30,000

    Explanation:

    . A $30,000 result has a 35 percent chance of occurring, but the entity cumulatively has a 55 percent chance of receiving at least a $30,000 tax benefit. As a result, $30,000 is the appropriate amount to recognize.
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