Need help with the attcahed questions with respect to the attached 10k.
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1. HP reports income tax expense of $699 million in its 2004 income statement and describes its income tax expense in Note 12 (pp. 121-124).
a. The company reports that it increased its valuation allowance for deferred tax assets by $47 million. What effect, if any, did this increase have on 2004 net income?
b. HP reports a deferred tax asset labeled "employee and retirement benefits." Briefly explain what caused this deferred tax asset to arise.
c. HP reports a deferred tax liability of $2.347 billion relating to "unremitted earnings of foreign subsidiaries."
i. Briefly explain how this liability arose.
ii. What effect, if any, does the recording of a deferred tax liability on unremitted earnings have on current profitability?
2. HP reports its investment in debt and equity securities in Note 8 (p.112). The company reports an unrecognized gain on equity securities in public companies of $40 million in 2004. By what amount, if any, did this unrecognized gain affect 2004 profit and why?
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Need help with the attcahed questions with respect to the attached 10k.
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1. HP reports income tax expense of $699 million in its 2004 income statement and describes its income tax expense in Note 12 (pp. 121-124).
a. The company reports that it increased its valuation ...
Solution Summary
This explains the concepts related to deferred tax liability by taking the example of HP
1. Smiley Corporation purchased a machine on January 2, 2006, for $2,000,000. The machine has an estimated 5-year life with no salvage value. The straight-line method of depreciation is being used for financial statement purposes and the following MACRS amounts will be deducted for tax purposes:
2006 $400,000 2009
Amanda Company began manufacturing operations on January 2, Year 4. In Year 4, Amanda earned a pretax book income of $300,000 and had taxable income of $400,000. The difference related to accrued product warranty costs which are expected to be paid out as follows: Year 5: $60,000; Year 6: $30,000; and Year 7: $10,000. The en
The following facts relate to McKane Corporation
1. Deferredtaxliability, January 1, 2010, $60,000
2. Deferredtax asset January 1, 2010 $20,000
3. Taxable income for 2010, $115,000
4. Cumulative temporary difference at December 31, 2010 giving rise to future
5. Cumulative temporary difference at December 31, 2010 giving
Easton Co. at the end of 2004, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:
Pretax financial income $ 400,000
Estimated litigation expense 1,000,000
Installment sales (800,000)
Taxable income 600,000
The estimated litigation expense o
At the end of their first year of operations on December 31, 2010 Zephyr, Inc had total GAAP financial net income before taxes of $190,000. Zephyr, Inc.'s tax rate is 35%. They had the following book-tax differences in 2010:
$30,000 Tax depreciation in excess of book depreciation
$1,500 Municipal bond interest income
$10,000
William Company reported $550,000 in financial (book) income before taxes for Year 3. Tax depreciation for the year exceeded book depreciation by $50,000. The tax rate for Year 3 was 30%, and Congress enacted a tax rate of 40% for years after year 3.
1. What is the deferredtax reported on William's December 31, Year 3 bal
The differences between the book basis and tax basis of the assets and liabilities at the end of 2008 are as follows:
Book Basis Tax Basis
AR $50,000 -0-
Litigation Liab 30,000 -0-
It is esti
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Pretax accounting income $3,000,000
Excess tax depreciation (90,000)
Taxable income $2,910,000
The excess tax depreciation will result in equal net taxable amounts in each of t
Matthew Company reported $350,000 in income before income tax for financial reporting (book) purposes in Year 3, its first year of operation. The tax depreciation exceeded its book depreciation by $30,000. The tax rate for Year 3 and all future years is 40%.
1. What amount of deferred income tax should Matthew report in i
1. Gold Ltd. reported deferredtax assets and deferredtax liabilities at the end of 2001 and 2002. For the year ended 2002, Gold should report deferred income tax expense or benefit equal to the
a. Sum of the net changes in deferredtax assets and deferredtax liabilities.
b. Decrease in deferredtax assets.
c. Increase i
