Question

In 2020, HD had reported a deferred tax asset of $130million with no valuation allowance, At December 31, 2021, the account balances of HD services showed a deferred tax asset of $ 170 million before assessing the need for a valuation allowance and income taxes payable of $ 90 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 2021. What amount should HD report as income tax expense in its 2021 income statement?

Answer 1

Deferred tax asset before valuation allowance	$        170	million
Deferred tax asset after valuation allowance	$        130	million
Deferred tax asset in valuation allowance	$          40	million

Income taxes payable	$          90	million
Less: Deferred tax asset in valuation allowance	$        (40)	million
Add: DTA not be realized (170*30%)	$          51	million
Income tax expense	$        101	million