ACCT. 302 Exam 2

Future income tax benefit

A deferred tax asset represents a:

operating or sales-type

ABC Books is the lessor in a lease agreement. From the perspective of the lessor, the lease may be classified as:

operating or finance

Cook the Books is the lessee in a lease agreement. From the perspective of the lessee, the lease may be classified as:

Computation of deferred tax assets and liabilities based on temporary differences

GAAP regarding accounting for income taxes requires which of the following procedures?

finance

Minnetonka Company leases an asset. Information regarding the lease: Fair value of the asset: $400,000. Useful life of the asset: 6 years with no salvage value. Lease term is 5 years. Annual lease payments are $60,000 Implicit interest rate: 11%. Minnetonka can purchase the asset at the end of the lease period for $50,000. What type of lease is this?

the major part of the remaining economic life of the leased property

One of the five criteria for a finance lease specifies that the lease term be equal to or greater than:

substantially all of the fair value of the asset

One of the five criteria for a finance lease specifies that the present value of the lease payments be equal to or greater than:

finance lease

Technoid Incorporated sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2024. The manufacturing cost of the computers was $12 million. This noncancelable lease had the following terms: Lease payments: $2,466,754 semiannually; first payment on January 1, 2024; remaining payments on June 30 and December 31 each year through June 30, 2028. Lease term: five years (10 semiannual payments). No residual value; no purchase option. Economic life of equipment: five years. Implicit interest rate and lessee's incremental borrowing rate: 5% semiannually. Fair value of the computers on January 1, 2024: $20 million. Lone Star Company would account for this as a(n):

sales-type lease with selling profit

Technoid Incorporated sells computer systems. Technoid leases computers to Lone Star Company on January 1, 2024. The manufacturing cost of the computers was $12 million. This noncancelable lease had the following terms: Lease payments: $2,466,754 semiannually; first payment on January 1, 2024; remaining payments on June 30 and December 31 each year through June 30, 2028. Lease term: five years (10 semiannual payments). No residual value; no purchase option. Economic life of equipment: five years. Implicit interest rate and lessee's incremental borrowing rate: 5% semiannually. Fair value of the computers on January 1, 2024: $20 million. Technoid would account for this as a(n):

The collectibility of the lease payments must be reasonably predictable

The five criteria provided in GAAP for distinguishing a finance lease from an operating lease do not include which of the following?

Present value of the lease payments

The lessee normally measures the lease liability to be recorded as the:

Bargain purchase option

The lessee's option to purchase a leased asset at a price that is sufficiently lower than the asset's expected fair value so that the exercise of the option appears reasonably certain sometimes is called a:

Investment expenses incurred to obtain tax-exempt income

Which of the following causes a permanent difference between taxable income and pretax accounting income?

MACRS used for depreciating equipment

Which of the following causes a temporary difference between taxable and pretax accounting income?

Which of the following creates a deferred tax liability

Which of the following creates a deferred tax liability?

Revenue collected in advance

Which of the following differences between financial accounting and tax accounting ordinarily creates a deferred tax asset?

Subscriptions collected in advance

Which of the following differences between financial accounting and tax accounting ordinarily creates a deferred tax asset?

Subscriptions collected in advance

Which of the following does not give rise to a permanent difference?

Plug tax payable

Which of the following is not one of the steps in the four-step method used to calculate tax expense?

Interest income on municipal bonds

Which of the following typically causes a permanent difference between taxable income and pretax accounting income?