Kroger Co. is one of the largest retail food companies in the United States as m
ID: 2473209 • Letter: K
Question
Kroger Co. is one of the largest retail food companies in the United States as measured by total annual sales. The Kroger Co. operates supermarkets, convenience stores, and manufactures and processes food that its supermarkets sell. Kroger's stores operate under names such as Dillon Food Stores, City Market, Kroger Kwik Shop, and Ralphs Grocery Company. Like most corporations, Kroger has significant deferred tax assets and liabilities. Using Edgar (www.sec.gov) or the company's website, check the company's annual report for the year ended February 1, 2014. 1. From the income statement, determine the income tax expense for the most recent year. Tie that number to the first table in disclosure Note 5: “Taxes Based on Income,” and prepare a summary journal entry that records Kroger's tax expense from continuing operations in the most recent year. 2. How are deferred taxes classified in Kroger's balance sheet? See the “Taxes Based on Income” note in the Notes to Consolidated Financial Statements. Considering disclosure Note 5: “Taxes Based on Income,” what amounts are reported among current assets or liabilities and among noncurrent assets or liabilities?
Explanation / Answer
Answer:1 According to Kroger Co.’s Consolidated Statement of Operations (located on p. 84 of their Annual Report) the recorded income tax expense for the year is $247 million.
Answer:2 Deferred tax assets and deferred tax liabilities are classified as eith er current or no ncurrent according to how the related assets or liabilities are classified for financial reporting. A deferred tax asset or deferr ed tax liability is considered to be related to an asset or liability if reduction (including amortization) of that asset or liability will cause the temporary difference to reverse. Deferred tax assets and deferred tax liabilities are not necessarily reported separately. Instead, they are offset, and a net current amount and a net noncurrent amount are reported as either an asset or a liability.
In the balance sheet, Kroger reports current deferred tax liabilities ($389 million) in excess of current deferred tax assets ($45 million), a $344 million net current liability. This is reported as part of current liabilities in the balance sheet. The company reports noncurrent deferred tax liabilities ($1,138 million) in excess of net noncurrent deferred tax assets ($754 million), a $384 million net noncurrent liability. This is reported separately as a long-term liability in the balance sheet.
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