INCOME TAX ANALYSISTHE COCA-COLA COMPANY AND PEPSICO, INC.The financial statements of Coca-Cola and PepsiCo are presented in Appendices C and D, respectively. The companies complete annual reports, including the notes to the financial statements, are available online.InstructionsUse the companies financial information to answer the following questions.(a)???What are the amounts of Coca-Colas and PepsiCos provision for income taxes for the year 2014? Of each companys 2014 provision for income taxes, what portion is current expense and what portion is deferred expense?(b)???What amount of cash was paid in 2014 for income taxes by Coca-Cola and by PepsiCo?(c)???What was the U.S. federal statutory tax rate in 2014? What was the effective tax rate in 2014 for Coca-Cola and PepsiCo? Why might their effective tax rates differ?(d)???For year-end 2014, what amounts were reported by Coca-Cola and PepsiCo as (1)
gross deferred tax assets and (2) gross deferred tax liabilities?(e)???Do either Coca-Cola or PepsiCo disclose any net operating loss carrybacks and/or carryforwards at year-end 2014? What are the amounts, and when do the carryforwards expire? Answer Preview
2014 provision for income tax amounts. 2014 tax rate was 39.6%. Coca-Cola = $9325 x 39.6% = $3692.7 million. PepsiCo = $8757 x 39.6% = $2199 million. From the income taxes. Coca-Cola Current expense is $2201 million and the deferred expense is $1491.7 million. PepsiCo Current expense is $2199 and did not have a deferred expense. Income taxes amounts for the year 2014. Coca-Cola = $2201 million. PepsiCo = $2199 million. 2014 US statutory federal tax rate was 39.6%. 2014 effective tax rate (total tax expense/ earnings before tax) %. Coca-Cola = (2201/9325) % = 23.6%. PepsiCo (2199/8757) % = 25.11%
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