Below Are Selected Portions from Quaker Oats' Tax Footnote in Its

Essay

Below are selected portions from Quaker Oats' tax footnote in its X6 annual report.

Provisions for income taxes on income before cumulative effect of accounting change were as follows:
$\begin{array}{lrrr}\text { Dollars in Millions }&\text { X6 }&\text { X5 }&\text { X4 }\\\text { Currently payable}\\\text { Federal } & \$ 99.4 & \$ 339.1 & \$ 129.8 \\\text { Foreign } & 10.2 & 131.7 & 15.0 \\\text { State } & 26.6 & 54.9 & 40.2 \\\text { Total currently payable } & 136.2 & 525.7 & 185.0 \\\text { Deferred-net } & & & \\\text { Federal } & 15.9 & (19.8) & (42.2) \\\text { Foreign } & 10.4 & (7.3) & (3.1) \\\text { State } & 5.2 & (2.1) & (12.4) \\\text { Total deferred-net } & 31.5 & (29.2) & (57.7) \\\text { Provision for income } & \$ 167.7 & \$ 496.5 & \$ 127.3\\\text { taxes }\end{array}$

The sources of pretax income before cumulative effect of accounting change were as follows:

$\begin{array}{lrrrr}\text { Dollars in Millions } &{\text { X6 }} & \text { X5 } & \text { X4 } \\\text { U.S. sources } & \$ 362.8 & \$ 925.4 & \$ 302.2 \\\text { Foreign sources } & 52.8 & 295.1 & 18.2 \\\hline\\\text {Income before income}\\\text { taxes and }\\\text {cumulative effect of }\\\text {accounting }\\\text {change}&\$415.6&\$1,220.5&\$320.4\end{array}$ The components of the deferred income tax provision (benefit) were as follows:

$\begin{array}{lcccc}\text { Dollars in Millions } & {\text { X6 }} & \text { X5 } & \text { X4 } \\\text { Accelerated tax depreciation } & \$ 3.7 & \$(23.8) & \$ 8.8 \\\text { Postretirement benefits } & 0.6 & (6.5) & (6.0)\\\text { Accrued expenses including }\\ \text { restructuring charges } & 40.6 & 12.6 & (30.8) \\\text { Loss carryforwards } & (7.1) & 3.5 & (6.1) \\\text { Foreign gain deferral } & 9.8 & - & - \\\text { Other } & (16.1) & (15.0) & (23.6)\\\text {Provision (benefit) for deferred}\\ \text {income taxes}&\$31.5&\$(29.2)&\$(57.7)\\\end{array}$

Deferred tax assets and deferred tax liabilities were as follows:
$\begin{array}{lrcrc}\text { Dollars in Millions } &\quad\quad\quad {\text { X6 }} &\quad\quad\quad\quad\quad {\text { X5 }} \\& \text { Assets } & \text { Liabilities } & \text { Assets } & \text { Liabilities } \\\text { Depreciation and amortization } & \$ 56.9 & \$ 400.1 & \$ 58.8 & \$ 405.6 \\\text { Postretirement benefits } & 100.3 & - & 100.9 & -\\\text { Other benefit plans } & 60.8 & 9.2 & 59.8 & 20.2 \\\text { Accrued expenses including }\\\quad \text { restructuring charges } & 80.3 & 7.9 & 147.9 & 10.4 \\ \text { Loss carryforwards }& 14.5 & - & 13.5 & - \\\text { Other } & 13.3 & 33.2 & 15.9 & 22.8 \\\text { Subtotal } & 326.1 & 450.4 & 396.8 & 459.0 \\\text { Valuation allowance } & (14.2) & - & (20.0) & - \\\text {Total}& \$ 311.9 & \$ 450.4 & \$ 376.8 & \$ 459.0\end{array}$
Required:

1a. What was the effective tax rate on all income for fiscal X6?
1b. What was the effective tax rate on foreign income for fiscal X6?

2a. How much did Quaker Oats record in deferred taxes for fiscal X6? Was this an asset or liability?
2b. What was the major item contributing to the deferred tax for X6? Explain fully how this arose.