ACC 3033 intermediate Accounting II Exam 2
An increase in taxes saved in future years as a result of deductible temporary differences
A DTA represents the
Increase of future taxes payable due to temporary taxable differences
A DTL represents the
Held to Maturity at Amortized Cost
A correct valuation is
each party can unilaterally terminate a contract without compensation
A criterion that indicates that a company should disregard revenue guidance for contracts is when
a future tax benefit
A deferred tax asset represents...
increase in the balance of a DTL MINUS the increase in the balance of DTA
A deferred tax expense is the
An increase in future taxes payable due to temporary taxable differences
A deferred tax liability represents
A DTA only
A deferred tax valuation allowance account is used to recognize a reduction in
A deferred tax asset only
A deferred tax valuation allowance account is used to recognize reduction in:
Reduce a DTA
A valuation account is used to:
The customer has NO significant risks or rewards of ownership
An indication that a customer has NOT taken control of a good or service is -
Fair Value <20% means the company has little to no influence over the investee company
An ownership interest of 15% in another company's Voting stock should be accounted for using the..,.
Equity Method
An ownership interest of 30% of common stock of another corporation should be accounted for using the...
AOCI in the equity section of the balance sheet
An unrealized holding gain on a company's AFS Securities should be reflected in the current financial statements as -
A.) the reason for a bill-and-hold must be substantive B.) the product must be identified separately as belonging to the customer C.) the product must be physically ready to be transferred to customer D.) the seller cannot have the ability to use the product or redirect it to another customer
Bill-and-Hold arrangement criteria:
$117,300 (pretax income $2,061,000 - income from municipal bonds $137,000 - Depreciation $163,000) x 30% MINUS tax payments made $411,000
Blossom Co. 2021 income statement showed pretax accounting income of $2,061,000. To compute the federal in come tax liability, the following data are provided: Income from exempt municipal bonds $137,000 Depreciation deducted for tax purposes in excess of depreciation deducted for financial statement purposes $163,000 Est. federal income tax payments made $411,000 Enacted corp. income tax rate 30% What amount of federal income tax liability should be included in Blossom's Dec. 31, 2021 Balance Sheet?
$246,050
Carla Vista co. prepared the following reconciliation for 2021, its first year of operations: pretax fin. income for 2021 $2,077,000 Tax exempt interest $(352,000) Originating temporary difference $(703,000) Taxable income $1,022,000 The temporary differences reverse evenly over next two years at an enacted tax rate o 35%. The enacted tax rate for 2021 is 30%. What amount should Carla Vista report for 2021 for deferred income taxes?
$491,312
Cheyenne company enters into a contract with a customer to build a warehouse for $401,700, with performance bonus of $104,200 that will be paid based on the timing of completion. the amount performance bonus decreases 20% each week beyond completion date. The contract requirements are similar to contracts Cheyenne has performed previously, and management believes that such experience is predictive for this contract. Management estimates a 50% probability the contract will be completed on agreed-upon date, 30% probability it will be completed one week late, and 20% two weeks lte. What is the total transaction price?
$293,800 non-current DTA
Crane Co. has the following four deferred tax items at Dec. 31, 2021. The DTA and DTL relate to income taxes levied by the same tax authority; Rent collected in advance; recognized when a performance obligation is satisfied for accounting purposes and received for tax purposes $653,800 (DTA) Use of straight-line depreciation for accounting purposes and accelerated depreciation for tax purposes $332,500 (DTL) Recognition of income on installment sales at the time of sale for accounting purposes and during period of collection for tax purposes $66,300 (DTL) Warranty liabilities; recognized for accounting purposes at the time of sale for tax purposes at time paid $38,800 (DTA) On Crane's Dec. 31, 2021, statement of financial position, it will report;
$96,120 Crane Co. has 30% (42,240/140,800) therefore we use equity method. Investors share of investees income is reported as revenue (.30 x $320,400)
Crane Co. purchased 42,240 shares of common stock of th Shamrock Co. for $50 per share on Jan, 2 2022. During 2022, Shamrock co. had 140,800 shares of common stock outstanding, paid cassh dividends of $120,100, and reported net Income of $320,400. Crane Co. should report revenue from the investment for 2022 in the amount of...
$337,200 DTA
Crane Co. reported the following results for the year ended Dec. 31, 2020, in its first year of operations: Income (per book) $3,343,000 Taxable income $4,467,000 The disparity b/w book income and taxable income is attributable to a temporary difference, which will reverse in 2021. What amount should Crane record as net DTL/DTA for year ended dec. 31, 2020, assuming enacted tax rates in effect are 35% in 2020 and 30% in 2021?
$573,370
Crane Inc. had pre-tax accounting income of $1,830,000 and tax rate of 35% in 202,1, its first year of operations. During 2021 the company had the following transactions: Received rent from Barrett Co. for 2022 $64,800 Municipal bond income $80,100 Depreciation for tax purposes in excess of book depreciation $41,500 Installment sales revenue to be collected in 2022 $135,000 For 2021, what is the amount of income taxes payable for Crane Inc.?
HTM, trading, and AFS
Debt Securities may be classified as -
Classified as Trading Securities and reported at fair value
Debt securities that are bought and held primarily for sale in the near term are reported at -
$18,700 The difference between the selling price ($384,200) and the cost ($365,500) of the securities is the amount of realized gain (loss) on sale
During 2021, Sheridan Co. purchased 17,000 hares of Sunland Corp. common stock for $365,500 as passive interest investment. The fair value of these shares was $491,300 at Dec. 31, 2021. during 2022, Sheridan sold all of Sunland stock for $348,200. Sheridan Co. should report a realized gain on the sale of stock in 2022 of...
$65,990 Net Proceeds less brokerage commissions ($452,990) less Initial cost ($387,000) Equals an unrealized gain
During 2022, Crane Co. purchased 17,200 shares of Shamrock Corp. C/S for $387,000 as a passive interest investment. The Fair Value of these shares was $377,540 at Dec. 31, 2022. Crane Sold all the Shamrock stock for $27.25 per share on July 3, 2023, incurring $15,710 in brokerage commissions. Crane Co. should report unrealized gain on sale of stock in 2023 of -
pretax income
Income tax expense is based on...
a fine resulting is OSHA violations
Gulfport Co.'s taxable income differed from its accounting income computed this past year. an item that would create a permanent difference in accounting and taxable incomes for Gulfport would be...
Consolidation Method
If a parent company owns 90% of the subsidiary company's outstanding common stock, the company should generally account for the investment in the subsidiary under the..
records a payable when consigned merchandise is sold
In a consignment sale, the consignee...
Variable consideration, non-cash consideration, time value of money, and consideration payable
In determining transaction price, the company must consider:
taxable income
Income tax expense is determined by all of the following EXCEPT: - pretax financial income - income for book purposes - taxable income - Income for financial reporting purposes
taxable income
Income tax payable is based (computed) on:
At COST plus BROKERAGE FEES and other incidental costs to the purchase
Investments in debt securities should be recorded on the date of acquisition at...
Future taxable and deductible amounts
Machinery was acquired at the beginning of the year, depreciation recorded during the life of the machinery could result in...
Credit to reduce the Allowance to Reduce DTA to expected Realizable value of $266,000
On Dec. 31 2021, Winston Inc. has determined that it is more likely than not that $266,00 of a $604,000 DTA will not be realized. The JE to record this reduction in asset value will include a
$48,504 ($404,200 carrying value of note x 12% imputed rate)
On Jan. 1, 2021, Oriole Co. sold goods to Cheyenne Co. for $404,200 in exchange for a four year, zero-interest-bearing note with a face amount of $636,015 (imputed rate 12%). The goods have an inventory cost on oriole's boos of $240,000. What amount of revenue should oriole recognize in 2021?
Unrealized gain of $17,000 To adjust the securities FVA account from $22,900 credit balance (Fair Value, 2021 of $477, 300 -$500,200, Cost of security) to a $5,900 credit balance ( Fair value, 2022 $494,300 -$500,200 cost), the company would debit the account and credit unrealized gain for the difference, $17,000 ($22,900 - $5,900)
On its dec. 31, 2021, balance sheet, Oriole Co. Reported its investment in trading securities, which had a cost of $500,200, at fair value of $477,300. At Dec. 31, 2022, the fair value of the securities was $494,300. What should Oriole report on its 2022 income statement as an increase in the fair value of the investments in 2022?
$31,290 deferred amount $89,400 x 35% future tax rate
Oriole Co. reported $236,000 in revenue in its 2021 financial statements, of which $89,400 will not be included in the tax return until 2022. The enacted tax rate is 40% for 2021 and 35% for 2022. what amount should Oriole report for DTL in its balance sheet at Dec. 31, 2021?
$3,700 The net unrealized loss results in a charge against income
Oriole Co.'s Trading Securities portfolio which is appropriately included in current assets is as follows: Dec. 31 2022 - Whispering Winds Co Cost $453,900 Fair Value $430,300 Unreal. G/L $(23,600) - Greening Inc Cost $237,300 Fair Value $257,500 Unreal. G/L $19,900 - Total Cost $691,200 Fair Value $687,500 Unreal. G/L $(3,700) Ignoring income taxes What amount should be reported as a charge in Oriole's 2022 income statement if 2022 is Oriole's first year of operation?
$2,900 Literally expect 10 units to be returned multiplied by selling price
Oriole co. sells 455 units for $290 each to Sheffield Inc. for cash. Oriole allows Sheffield t return any unused product within 30 days and receive full refund. The cost of each product is $174.To determine transaction price, Oriole decides that the approach that is most predictive of the amount of consideration which it will be entitled is the most likely amount. Using the most likely amount, Oriole estimates that 10 units will be returned, the cost of recovering the units are immaterial, and returned units are expected to be resold at profit. What amount of liability should Oriole record at time of sale?
the establishment of a deferred tax asset
Recognition of tax benefits in the loss year due to a loss carryforward requires
Ability to hold security to maturity Positive intent the security must be a debt security
Requirements for a security to be classified as HTM are...
$498,164 Sandhill owns 40% (40,040/100,100) of sweet acacia, therefore equity method will be used. Beginning balance ($434,100) plus Net Income ($640,640 x .4) less Dividends ($480,480 x .4)
Sandhill Co. owns 40,040 of the 100, 100 outstanding shares of Sweet Acacia Inc. C/S. During 2022, Sweet Acacia earns $640,640 and pays cash dividends of $480,480. If the beginning balance in Sandhill's investment account was $434,100, the balance in the Dec. 31, 2022 should be...
$122,000
Sunland co. sold 3,090 Holsks during 2021 at a total price of $12,360,000 with a warranty guarantee that the product was free of any defects. The cost of the Holsks sold is $7,245,000. The term of the assurance warranty is two years, with estimated cost of $80,500. In addition, Sunland sold extended warranties related to 1,220 Holsks for 3 years beyond the 2 year period or $122,000. Sunland should record unearned warranty revenue in 2021 of...
Reported on the portfolio of investments AOCI in Equity section of B/S
The Unrealized G/L on AFS securities are:
reduce deferred tax assets by a valuation allowance if necessary
The last procedure (step) in the computation of deferred income taxes is to:
When each performance obligation is satisfied
The seller of a good or service should recognize revenue...
Adopts Asset-liability approach for revenue recognition
The standard, Revenue from Contracts with Customers,
A part of Net Income
The unrealized holding gain or loss on trading securities is reported as:
Records its proportionate share as an increase in its investment account
Under the equity method, if an investee company generates net income, the investor company:
Declines in fair value
Under the equity method, the investment account is decreased by all the following EXCEPT the investor's proportionate share of: - dividends paid by the investee - declines in fair value - losses of investee - All the above
Trading Security
Unrealized gains or losses which are recognized in income are classified as trading
Availiable for Sale Securities
Unrealized gains/losses are recognized as other comprehensive income for -
product warranty liabilities
What is a temporary difference normally classified as expense or loss and deductible after they are recognized in future income?
Interest received on state and municipal obligations
What is an example of a permanent difference?
residual approach
Which method of measuring fair value of a performance obligation is dependent on the standalone selling price of other goods or services promised in the contract?
$60,045
Wildhorse Corp.'s 2021 income statement showed pretax accounting income of $1,045,000. To compute federal income tax liability, the following 2021 dates are provided; income from municipal bonds $43,700 depreciation deducted for tax purposes in excess of depreciation deducted for financial statement purposes $97,500 Estimated federal income tax payments made $188,500 Enacted corporate income tax rate 27.5% What amount of current federal income tax liability should be recorded in Wildhorse's Dec. 31, 2021 balance sheet?
$39,566
Wildhorse purchases equipment, installation, and training from swiftly for a price of $1,024,000 and chooses Swiftly to do installation. Swiftly charges the same price for equipment irrespective of whether it doe the installation or not. ( some companies do installation themselves). The price of installation has a estimated fair value of $21,000. The standalone selling price of equipment is $1,024,000. The fair value of the training sessions is estimated at $42,000. Other companies can also provide training services. Wildhorse os obligated to pay swiftly $1,024,00 upon delivery and installation of equipment. Swiftly delivers the equipment on May 1, 2021 and completes installation on July 1, 2021. Training starts once installation is completed and lasts one year. Equipment has useful life of 8 years. What amount is recorded by swiftly as unearned service revenue at 7/1/21?
$401,000
on Jan.1 2021, Blossom Co. sold goods to Pina Co. for $401,000 in exchange for a four year, zero-interest-bearing note with face amount of $630,979 (imputed rate of 12%). The goods have inventory cost on Blossom's books of $240000. What amount of sales revenue should Blossom recognize in 2021?
3 months
trading securities are generally held for less that -
