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CHAPTER 19
Accounting for Income Taxes
ASSIGNMENT CLASSIFICATION TABLE (BY TOPIC)
Topics Questions
Brief Exercises Exercises Problems
Concepts for Analysis
- Reconcile pretax financial income with taxable income.
1, 14 1, 2, 3, 4, 5, 10, 16, 18, 19
1, 2, 3, 4, 8
- Identify temporary and permanent differences.
3, 4, 12, 13 4, 5, 6, 7 2, 3, 4 3, 4, 5
- Determine deferred income taxes and related items— single tax rate.
5, 6, 8, 9, 10, 13
1, 2, 3, 4, 5, 6, 7, 9
1, 3, 4, 5, 7, 8, 10, 12, 13, 17
3, 4, 8, 9 2
- Classification of deferred taxes.
11 15 7, 8, 9, 14, 16, 17, 18, 19, 20
3, 6 2, 3, 5
- Determine deferred income taxes and related items— multiple tax rates, expected future income.
10 2, 11, 14, 15, 16, 18, 20
1, 2, 6, 7 1, 6, 7
- Determine deferred taxes, multiple rates, expected future losses.
10
- Carryback and carryforward of NOL.
16, 17, 18, 12, 13, 14 21, 22, 23, 24, 25
5
- Change in enacted future tax rate.
14 11 14 2, 7 5, 6
- Tracking temporary differences through reversal.
8, 15 2, 7
- Income statement presentation. 9, 10 8 1, 2, 3, 4, 5, 7, 10, 14, 17, 22, 23, 24, 25
1, 2, 3, 5, 7, 8, 9
- Conceptual issues—tax allocation.
1, 2, 7 7 1, 2, 7
- Valuation allowance—deferred tax asset.
7, 18 7 7, 12, 13, 23, 24, 25
- Disclosure and other issues. 15, 19
ASSIGNMENT CLASSIFICATION TABLE (BY LEARNING OBJECTIVE)
Learning Objectives Questions
Brief Exercises Exercises Problems
Concepts for Analysis
- Understand the fundamentals of accounting for income taxes.
1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11
3, 4, 5, 6, 7, 8, 9, 10
1, 2, 3, 4, 5, 6, 7, 8, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22
1, 2, 3, 4, 6, 7, 8, 9
1, 2, 6, 7
- Identify additional issues in accounting for income taxes.
12, 13, 14, 15
1, 2, 3, 5, 6, 7, 8, 10, 11
1, 2, 3, 4, 5, 6, 7, 8, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20
1, 2, 3, 4, 7, 8, 9
3, 4, 5
- Explain the accounting for loss carrybacks and loss carryforwards.
16, 17, 18 12, 13, 14 21, 22, 23, 24, 25
5 6
- Describe the presentation of deferred income taxes in financial statements.
15, 19 4, 15 9, 14, 19, 20 1, 3, 4, 6, 7, 8, 9
3, 4
ASSIGNMENT CHARACTERISTICS TABLE (Continued)
Item Description
Level of Difficulty
Time (minutes)
P19-1 Three differences, no beginning deferred taxes, multiple rates. Complex 40–
P19-2 One temporary difference, tracked for 4 years, one permanent difference, change in rate.
Complex 50–
P19-3 Second year of depreciation difference, two differences, single rate, discontinued operations.
Complex 40–
P19-4 Permanent and temporary differences, one rate. Moderate 20– P19-5 (^) NOL without valuation account. Simple 20–
P19-6 Two differences, two rates, future income expected. Moderate 20–
P19-7 One temporary difference, tracked 3 years, change in rates, income statement presentation.
Complex 45–
P19-8 Two differences, 2 years, compute taxable income and pretax financial income.
Complex 40–
P19-9 Five differences, compute taxable income and deferred taxes, draft income statement.
Complex 40–
CA19-1 Objectives and principles for accounting for income taxes. Simple 15–
CA19-2 Basic accounting for temporary differences. Moderate 20–
CA19-3 Identify temporary differences and classification criteria. Complex 20–
CA19-4 Accounting and classification of deferred income taxes. Moderate 20–
CA19-5 Explain computation of deferred tax liability for multiple tax rates. Complex 20–
CA19-6 Explain future taxable and deductible amounts, how carryback and carryforward affects deferred taxes.
Complex 20–
CA19-7 Deferred taxes, income effects. Moderate 20–
ANSWERS TO QUESTIONS
- Pretax financial income is reported on the income statement and is often referred to as income before income taxes. Taxable income is reported on the tax return and is the amount upon which a company’s income taxes payable are computed.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
- One objective of accounting for income taxes is to recognize the amount of taxes payable or refundable for the current year. A second objective is to recognize deferred tax liabilities and assets for the future tax consequences of events already recognized in the financial statements or tax returns.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
- A temporary difference is a difference between the tax basis of an asset or liability and its reported (carrying or book) amount in the financial statements that will result in taxable amounts or deductible amounts in future years when the reported amount of the asset is recovered or when the reported amount of the liability is settled. The temporary differences discussed in this chapter all result from differences between taxable income and pretax financial income which will reverse and result in taxable or deductible amounts in future periods.
Examples of temporary differences are: (1) Gross profit or gain on installment sales reported for financial reporting purposes at the date of sale and reported in tax returns when later collected. (2) Depreciation for financial reporting purposes is less than that deducted in tax returns in early years of assets’ lives because of using an accelerated depreciation method for tax purposes. (3) Rent and royalties taxed when collected, but deferred for financial reporting purposes and recognized as when the performance obligation is satisfied in later periods. (4) Unrealized gains or losses recognized in income for financial reporting purposes but deferred for tax purposes.
LO: 1, Bloom: K, Difficulty: Simple, Time: 5-7, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
- An originating temporary difference is the initial difference between the book basis and the tax basis of an asset or liability. A reversing difference occurs when a temporary difference that originated in prior periods is eliminated and the related tax effect is removed from the tax account.
LO: 1, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
- Book basis of assets ................................................................................... $900, Tax basis of assets ..................................................................................... 700, Future taxable amounts .............................................................................. 200, Tax rate ...................................................................................................... 34% Deferred tax liability (end of 2018) .............................................................. $ 68,
LO: 1, Bloom: AP, Difficulty: Simple, Time: 3-5, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
- Book basis of asset $90,000 Deferred tax liability (end of 2018) $ 30, Tax basis of asset –0– Deferred tax liability (beginning of 2018) 68, Future taxable amounts 90,000 Deferred tax benefit for 2018 (37,400) Tax rate X 34% Income taxes payable for 2018 230, Deferred tax liability (end of 2018) $30,600 Income tax expense for 2018 $192,
LO: 1, Bloom: AP, Difficulty: Simple, Time: 5-7, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
Questions Chapter 19 (Continued)
Examples of permanent differences are: (1) interest received on municipal obligations (such interest is included in pretax financial income but is not included in taxable income), (2) premiums paid on officers’ life insurance policies in which the company is the beneficiary (such premiums are not allowable expenses for determining taxable income but are expenses for determining pretax financial income), and (3) fines and expenses resulting from a violation of law. Item (3), like item (2), is an expense which is not deductible for tax purposes.
LO: 2, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
- Pretax financial income........................................................................................ $550, Interest income on municipal bonds.................................................................... (70,000) Hazardous waste fine ......................................................................................... 25, Depreciation ($60,000 – $45,000)....................................................................... 15, Taxable income .................................................................................................. 520, Tax rate .............................................................................................................. X 30% Income taxes payable ......................................................................................... $156,
LO: 2, Bloom: AP, Difficulty: Simple, Time: 3-5, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
- $200,000 (2020 taxable amount) 10% (30% – 20%) $ 20,000 Decrease in deferred tax liability at the end of 2017
Deferred Tax Liability ............................................................................... 20, Income Tax Expense ....................................................................... 20,
LO: 2, Bloom: AP, Difficulty: Simple, Time: 3-5, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
- Some of the reasons for requiring income tax component disclosures are: (a) Assessment of the quality of earnings. Many investors seeking to assess the quality of a company’s earnings are interested in the reconciliation of pretax financial income to taxable income. Earnings that are enhanced by a favorable tax effect should be examined carefully, particularly if the tax effect is nonrecurring. (b) Better prediction of future cash flows. Examination of the deferred portion of income tax expense provides information as to whether taxes payable are likely to be higher or lower in the future.
LO: 2, 4, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
- The loss carryback provision permits a company to carry a net operating loss back two years and receive refunds for income taxes paid in those years. The loss must be applied to the second preceding year first and then to the preceding year. The loss carryforward provision permits a company to carry forward a net operating loss twenty years, offsetting future taxable income. The loss carryback can be accounted for with more certainty because the company knows whether it had taxable income in the past; such is not the case with income in the future.
LO: 3, Bloom: K, Difficulty: Simple, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
- The company may choose to carry the net operating loss forward, or carry it back and then forward for tax purposes. To forego the two-year carryback might be advantageous where a taxpayer had tax credit carryovers that might be wiped out and lost because of the carryback of the net operating loss. In addition, tax rates in the future might be higher, and therefore on a present value basis, it is advantageous to carry forward rather than carry back.
Questions Chapter 19 (Continued)
For financial reporting purposes, the benefits of a net operating loss carryback are recognized in the loss year. The benefits of an operating loss carryforward are recognized as a deferred tax asset in the loss year. If it is more likely than not that the asset will be realized, the tax benefit of the loss is also recognized by a credit to Income Tax Expense on the income statement. Conversely, if it is more likely than not that the loss carryforward will not be realized in future years, then an allowance account is established in the loss year and no tax benefit is recognized on the income statement of the loss year.
LO: 3, Bloom: AP, Difficulty: Simple, Time: 3-5, AACSB: Analytic, Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
- Many believe that future deductible amounts arising from net operating loss carryforwards are different from future deductible amounts arising from normal operations. One rationale provided is that a deferred tax asset arising from normal operations results in a tax prepayment—a prepaid tax asset. In the case of loss carryforwards, no tax prepayment has been made. Others argue that realization of a loss carryforward is less likely—and thus should require a more severe test—than for a net deductible amount arising from normal operations. Some have suggested that the test be changed from “more likely than not” to “probable” realization. Others have indicated that because of the nature of net operating losses, deferred tax assets should never be established for these items.
LO: 3, Bloom: K, Difficulty: Moderate, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: Communication
- Uncertain tax positions are tax positions for which the tax authorities may disallow a deduction in whole or in part. Uncertain tax positions often arise when a company takes an aggressive approach in its tax planning, such as instances in which the tax law is unclear or the company may believe that the risk of audit is low. Such positions give rise to tax benefits by either reducing income tax expense or related payables or by increasing an income tax refund receivable or deferred tax asset. In assessing whether an uncertain tax position should be recognized, companies must determine whether a tax position will be sustained upon audit. If the probability is more than 50 percent, the company may reduce its liability or increase its assets. If the probability is less that 50 percent, companies may not record the tax benefit. In determining “more likely than not,” companies must assume that they will be audited by the tax authorities. If the recognition threshold is passed, compa- nies must then estimate the amount to record as an adjustment to its tax assets and liabilities.
LO: 4, Bloom: K, Difficulty: Moderate, Time: 3-5, AACSB: Communication, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
BRIEF EXERCISE 19-
Book value of warranty liability .................................................... $105, Tax basis of warranty liability....................................................... –0– Cumulative temporary difference at 12/31/17 .............................. 105, Tax rate .......................................................................................... X 40% 12/31/17 deferred tax asset ........................................................... $ 42,
LO: 1, 2, Bloom: AP, Difficulty: Simple, Time: 3-5, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
BRIEF EXERCISE 19-
Deferred tax asset, 12/31/18.......................................................... $59, Deferred tax asset, 12/31/17.......................................................... 30, Deferred tax benefit for 2018 ........................................................ (29,000) Current tax expense for 2018 ....................................................... 61, Total income tax expense for 2018 .............................................. $32,
LO: 1, 2, Bloom: AP, Difficulty: Simple, Time: 3-5, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
BRIEF EXERCISE 19-
Income Tax Expense ....................................................... 60, Allowance to Reduce Deferred Tax Asset to Expected Realizable Value .............................. 60,
LO: 1, 2, Bloom: AP, Difficulty: Simple, Time: 3-5, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
BRIEF EXERCISE 19-
Income before income taxes .......................................... $195, Income tax expense Current...................................................................... $48, Deferred .................................................................... 30,000 78, Net income ....................................................................... $117,
LO: 1, 2, Bloom: AP, Difficulty: Simple, Time: 3-5, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
BRIEF EXERCISE 19-
Income Tax Expense ....................................................... 71, Income Taxes Payable ($148,000* X 45%) .............. 66, Deferred Tax Liability ($10,000 X 45%) ................... 4,
LO: 1, 2, Bloom: AP, Difficulty: Simple, Time: 3-5, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
BRIEF EXERCISE 19-
Year Future taxable amount X Tax Rate = Deferred tax liability 2018 $ 42,000 34% $ 14, 2019 244,000 34% 82, 2020 294,000 40% 117, $214,
LO: 1, 2, Bloom: AP, Difficulty: Simple, Time: 3-5, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
BRIEF EXERCISE 19-
Income Tax Expense ...................................................... 120, Deferred Tax Liability ($2,000,000 X 6%) ............... 120,
LO: 2, Bloom: AP, Difficulty: Simple, Time: 3-5, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
BRIEF EXERCISE 19-
Income Tax Refund Receivable ..................................... 144, Benefit Due to Loss Carryback $97,500 + [($480,000 – $325,000) X 30%] ........... 144,
LO: 3, Bloom: AP, Difficulty: Simple, Time: 3-5, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
BRIEF EXERCISE 19-
Income Tax Refund Receivable ($350,000 X .40) ......... 140, Benefit Due to Loss Carryback .............................. 140,
Deferred Tax Asset ($500,000 – $350,000) X .40........... 60, Benefit Due to Loss Carryforward ......................... 60,
LO: 3, Bloom: AP, Difficulty: Simple, Time: 3-5, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
SOLUTIONS TO EXERCISES
EXERCISE 19-1 (15–20 minutes)
(a) Pretax financial income for 2017 $300, Temporary difference resulting in future taxable amounts in 2018 (55,000) in 2019 (60,000) in 2020 (65,000) Taxable income for 2017 $120,
Taxable income for 2017 $120, Enacted tax rate 30% Income taxes payable for 2017 $ 36,
(b) Future Years 2018 2019 2020 Total Future taxable (deductible) amounts $55,000 $60,000 $65,000 $180, Tax rate 30% 30% 30% Deferred tax liability (asset) $16,500 $18,000 $19,500 $ 54,
Deferred tax liability at the end of 2017 $54, Deferred tax liability at the beginning of 2017 –0– Deferred tax expense for 2017 (increase in deferred tax liability) 54, Current tax expense for 2017 (Income taxes payable) 36, Income tax expense for 2017 $90,
Income Tax Expense ............................................... 90, Income Taxes Payable ..................................... 36, Deferred Tax Liability....................................... 54,
(c) Income before income taxes $300, Income tax expense Current $36, Deferred 54,000 90, Net income $210,
Note: The current/deferred tax expense detail can be presented in the notes to the financial statements.
LO: 1, 2, Bloom: AP, Difficulty: Simple, Time: 15-20, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
EXERCISE 19-2 (15–20 minutes)
(a) Pretax financial income for 2016 $300, Excess of tax depreciation over book depreciation (40,000) Rent received in advance 20, Taxable income $280,
(b) Income Tax Expense ............................................. 120, Deferred Tax Asset ................................................ 8,000* Income Taxes Payable ($280,000 X .40) ........ 112, Deferred Tax Liability ..................................... 16,000**
Temporary Difference
Future Taxable (Deductible) Amounts
Tax Rate
Deferred Tax
(Asset) Liability **Depreciation ($40,000 40% $16, *Unearned rent ( (20,000) 40% $(8,000) $(8,000) $16,
(c) Income Tax Expense ............................................. 134,000* Deferred Tax Liability ($10,000 X .40) ................... 4, Income Taxes Payable ($325,000 X .40) ........ 130, Deferred Tax Asset ($20,000 X .40) ............... 8,
Temporary Difference
Future Taxable (Deductible) Amounts
Tax Rate
Deferred Tax
(Asset) Liability **Depreciation ($30,000 40% $12, *Unearned rent 40% $ 0 $ 0 $12,
Deferred tax liability at the beginning of 2017 $16, Deferred tax liability at the end of 2017 12, Deferred tax benefit for 2017 (decrease required in deferred tax liability) $ (4,000) Deferred tax asset at the end of 2017 0 Deferred tax asset at the beginning of 2017 8, Deferred tax expense for 2017 (decrease required in deferred tax asset) 8, Current tax expense for 2017 130, Income tax expense for 2017 $134,
LO: 1, 2, Bloom: AP, Difficulty: Simple, Time: 15-20, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
EXERCISE 19-4 (15–20 minutes)
(a) Pretax financial income for 2017 $70, Excess depreciation per tax return (16,000) Excess rent collected over rent earned 22, Nondeductible fines 11, Taxable income $87,
Taxable income $87, Enacted tax rate 30% Income taxes payable $26,
(b) Income Tax Expense ............................................... 24, Deferred Tax Asset .................................................. 6, Income Taxes Payable ..................................... 26, Deferred Tax Liability ....................................... 4,
Temporary Difference
Future Taxable (Deductible) Amounts
Tax Rate
Deferred Tax (Asset) Liability Depreciation ($16,000 30% $4, Unearned rent ( (22,000) 30% $(6,600) Totals $ (6,000) $(6,600) $4,800*
*Because of a flat tax rate, these totals can be reconciled: $(6,000) X 30% = $(6,600) + $4,800.
Deferred tax liability at the end of 2017 $4, Deferred tax liability at the beginning of 2017 0 Deferred tax expense for 2017 (increase required in deferred tax liability) $4,
Deferred tax asset at the end of 2017 $(6, Deferred tax asset at the beginning of 2017 0 Deferred tax benefit for 2017 (increase required in deferred tax asset) $(6,600)
Deferred tax expense for 2017 $ 4, Deferred tax benefit for 2017 (6,600) Net deferred tax benefit for 2017 (1,800) Current tax expense for 2017 (Income taxes payable) 26, Income tax expense for 2017 $24,
EXERCISE 19-4 (Continued)
(c) Income before income taxes $70, Income tax expense Current $26, Deferred (1,800) 24, Net income $45,
Note: The details on the current/deferred tax expense may be presented in a note to the financial statements.
(d) $24,300^ = 34.7% effective tax rate for 2017. $70,
LO: 1, 2, Bloom: AP, Difficulty: Simple, Time: 15-20, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
EXERCISE 19-5 (15–20 minutes)
(a) Taxable income $95, Enacted tax rate 40% Income taxes payable $38,
(b) Income Tax Expense ............................................... 80, Deferred Tax Asset .................................................. 14, Income Taxes Payable ..................................... 38, Deferred Tax Liability....................................... 56,
Temporary Difference
Future Taxable (Deductible) Amounts
Tax Rate
Deferred Tax (Asset) Liability First one ($240,000 40% $96, Second one ( (35,000) 40% $(14,000) Totals $205,000 $(14,000) $96,
*Because of a flat tax rate, these totals can be reconciled: $205,000 X 40% = $(14,000) + $96,000.
Deferred tax liability at the end of 2017 $96, Deferred tax liability at the beginning of 2017 40, Deferred tax expense for 2017 (increase required in deferred tax liability) $56,
Deferred tax asset at the end of 2017 $(14, Deferred tax asset at the beginning of 2017 –0– Deferred tax benefit for 2017 (increase required in deferred tax asset) $(14,000)
EXERCISE 19-6 (10–15 minutes)
(a) (2) (e) (2) (i) (3)* (b) (1) (f) (2) (j) (1) (c) (3) (g) (3) (k) (1) (d) (1) (h) (3)
*When the cost method is used for financial reporting purposes, the dividends are recognized in the income statement in the period they are received, which is the same period they be must be reported on the tax return. However, depending on the level of ownership by the investor, 70% or 80% of the dividends received from other U.S. corporations may be excluded from taxation because of a “dividends received deduction.” These tax-exempt dividends create a permanent difference.
LO: 1, 2, Bloom: AP, Difficulty: Simple, Time: 10-15, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
EXERCISE 19-7 (10–15 minutes)
(a) greater than (b) $190,000 = ($76,000 divided by 40%) (c) are not (d) less than (e) benefit; $15, (f) $3,500 = [($100,000 X 40%) – $36,500] (g) debit (h) $59,000 = ($82,000 – $23,000) (i) more likely than not; will not be (j) benefit
LO: 1, 2, Bloom: AP, Difficulty: Simple, Time: 10-15, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
EXERCISE 19-8 (10–15 minutes)
(a) 2017
Income Tax Expense .............................................. 336, Deferred Tax Asset ($20,000 X 40%) ..................... 8, Deferred Tax Liability ($30,000 X 40%).......... 12, Income Taxes Payable ($830,000 X 40%) ...... 332,
Income Tax Expense .............................................. 364, Deferred Tax Asset ($10,000 X 40%) ..................... 4, Deferred Tax Liability ($40,000 X 40%).......... 16, Income Taxes Payable ($880,000 X 40%) ...... 352,
Income Tax Expense .............................................. 378, Deferred Tax Asset ($8,000 X 40%) ....................... 3, Deferred Tax Liability ($10,000 X 40%).......... 4, Income Taxes Payable ($943,000 X 40%) ...... 377,
(b)
Deferred tax asset ($8,000 + $4,000 + $3,200) $15, Deferred tax liability ($12,000 + $16,000 + $4,000) 32, Net non-current liability (deferred tax liability) $16,
(c)
Pretax financial income $945, Income tax expense Current $377, Deferred ($4,000 – $3,200) 800 378, Net Income $567,
Note: The details on the current/deferred tax expense can be disclosed in the notes to the financial statements.
LO: 1, 2, Bloom: AP, Difficulty: Simple, Time: 10-15, AACSB: Analytic, AICPA BB: None, AICPA FC: Reporting, AICPA PC: None
