In 2015, HD had reported a deferred tax asset of $98 million with no valuation a

Question

In 2015, HD had reported a deferred tax asset of $98 million with no valuation allowance. At December 31, 2016, the account balances of HD Services showed a deferred tax asset of $130 million before assessing the need for a valuation allowance and income taxes payable of $84 million. HD determined that it was more likely than not that 30% of the deferred tax asset ultimately would not be realized. HD made no estimated tax payments during 2016. What amount should HD report as income tax expense in its 2016 income statement? (Round your calculations to the nearest whole million.)

$52 million

$84 million

$91 million

$123 million

In 2015, HD had reported a deferred tax asset of $98 million with no valuation allowance. At December 31, 2016, the account balances of HD Services showed a deferred tax asset of $130 million before assessing the need for a valuation allowance and income taxes payable of $84 million. HD determined that it was more likely than not that 30% of the deferred tax asset ultimately would not be realized. HD made no estimated tax payments during 2016. What amount should HD report as income tax expense in its 2016 income statement? (Round your calculations to the nearest whole million.)

Explanation / Answer

HD Amt $ Deferred Tax Asset balance at 2016 end     130,000,000 Realizable Deferred Tax Asset @70 % of balance        91,000,000 Deferred Tax Asset balance at the end of 2015        98,000,000 a Reduction in Deferred Tax Asset in 2016          7,000,000 b Add : Income Tax payable in 2016        84,000,000 Total Income Tax expense in 2016=a+b= $   91,000,000 So answer is $91 million

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