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Bricks and Mortar

In: Business and Management

Submitted By vargas662
Words 406
Pages 2
Bricks & Mortar Co. is a manufacturer of construction equipment. It has an applicable tax rate of 40 percent and no unused tax loss or credit carryforwards. The Company’s fiscal year ends on December 31. In prior years, the Company had no uncertain tax positions that required recognition under ASC 740. The last date of payment of fiscal year 2009 tax is March 17, 2010, for purposes of accruing interest and penalties under the tax law. Based on the issues being presented in this case the following Accounting Standards apply.
Accounting Standards Codification (ASC) 740-10 requires that companies must determine if the organization has any uncertain tax positions (UTPs). If an organization has taken a tax position that would not hold up under examination, then the organization could have a substantial tax liability. An organization must identify tax positions and whether or not it is likely that each position would be sustained by a taxing authority and it appears not more likely that the position could be sustained upon examination the company must calculate the taxes, interest and penalties that would be owed.

Issue 1
Determine the adjustments required to the Company’s preliminary 2009 financial statements to comply with ASC 740-10 by completing the table provided below, and justify your position.
ASC 740-10 allows you to take a deduction based on the likelihood of that position being realized of more than 50%. Based on the information provided under Issue 1 the company highest probability of the $100 deduction being accepted is only 40% which means this savings would not be realized and therefore need to be added back to the tax liability as reflected in the chart below.
Over what periods should interest be accrued in 2010 for financial reporting purposes? Provide support for your conclusion
Interest should be accrued for the period of time when the tax...

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