FIN_48_two differences_solution

FIN_48_two differences_solution - FIN 48: A deferred tax...

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FIN 48: A deferred tax asset and a deferred tax liability – SOLUTION In 2009 Miller Corporation reported pretax financial income of $415,000. Miller recorded the following transactions in 2009: $20,000 prepaid rent which is included in book income in 2010, and $35,000 interest paid which is capitalized as part of an asset’s cost for book purposes, but is fully deducted for tax purposes. Miller applies the recognition and measurement criteria found in FIN 48, and determines that only $20,000 of the interest paid is currently deductible. That is, a $20,000 deduction is more likely than not of being sustained on audit, based on the technical merits of the position, and is the largest amount of benefit cumulatively greater than 50% likely to be realized. Assume Miller’s tax rate is 35% Required : (1) Compute Miller’s 2009 taxable income. (2) Prepare the journal entry (or entries) to record Miller’s income taxes for 2009. Miller’s taxable income is computed as follows:
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This note was uploaded on 03/04/2010 for the course TAX 6845 taught by Professor Kelliher,c during the Fall '08 term at University of Central Florida.

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FIN_48_two differences_solution - FIN 48: A deferred tax...

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