Reference no: EM132827559
Question - PPP owns 100% of SSS. You were provided with the following information for intercompany transactions between PPP and SSS during 2018. Assume a 40% tax rate.
a) On January 1, 2018, PPP had $100,000 worth of inventory it bought from SSS. The profit earned on this sale was to PPP by SSS was $30,000. 90% of this inventory remained in the warehouses of PPP at the end of 2018, with 10% sold to outside parties. Assume none of this inventory was sold on January 1.
b) On June 30, 2018 PPP sold land to SSS where the gain on the sale (prior to taxes), was $25,000. This land was sold to outside parties on December 20, 2018.
c) Also on June 30, 2018, PPP sold inventory to SSS for $60,000. The profit before tax on this sale to SSS, was $15,000. At the end of 2018, 30% of this inventory was still in the warehouses of SSS.
Required - Calculating the following:
-value of the Consolidated Deferred Tax Asset account on January 2, 2018.
-amount of unrealized gain on the land sale after tax on June 30, 2018.
-amount of overall realized profit after tax that can be recognized for the consolidated entity on December 31, 2018.
-What is the balance of the Consolidated Deferred Tax Asset on January 1, 2019.
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