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Haag Corp.'s 2021 income statement showed pretax accounting income of $2500000. To compute the federal income tax liability, the following 2021 data are provided: Income from exempt municipal bonds $100000 Depreciation deducted for tax purposes in excess of depreciation deducted for financial statement purposes 200000 Estimated federal income tax payments made 330000 Enacted corporate income tax rate 20% What amount of current federal income tax liability should be included in Haag's December 31, 2021 balance sheet? $150000 $110000 $440000 $170000

$110000

Fleming Company has the following cumulative taxable temporary differences: 12/31/21 12/31/20 $1600000 $2250000 The tax rate enacted for 2021 is 30%, while the tax rate enacted for future years is 20%. Taxable income for 2021 is $4000000 and there are no permanent differences. Fleming's pretax financial income for 2021 is: $2400000 $3350000 $4000000 $5600000

$3350000

Ferguson Company has the following cumulative taxable temporary differences: 12/31/22 12/31/21 $3600000 $2560000 The tax rate enacted for 2022 is 30%, while the tax rate enacted for future years is 20%. Taxable income for 2022 is $6400000 and there are no permanent differences. Ferguson's pretax financial income for 2022 is $5360000. $2800000. $7440000. $10000000.

$7440000

Accounting for income taxes can result in the reporting of deferred taxes as a current liability. a current asset. a contra-asset account. a noncurrent liability.

A noncurrent liability

Hopkins Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $3000000 Estimated litigation expense 4000000 Extra depreciation for taxes (6000000) Taxable income $ 1000000 The estimated litigation expense of $4000000 will be deductible in 2021 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $2000000 in each of the next 3 years. The income tax rate is 20% for all years. The deferred tax liability to be recognized is $800000. $600000. $1000000. $1200000.

$1200000

Larsen Corporation reported $200000 in revenues in its 2021 financial statements, of which $66000 will not be included in the tax return until 2022. The enacted tax rate is 30% for 2021 and 25% for 2022. What amount should Larsen report for deferred income tax liability in its balance sheet at December 31, 2021? $16500 $19800 $60000 $50000

$16500

Rodd Co. reports a taxable and pretax financial loss of $900000 for 2021. Rodd's taxable and pretax financial income and tax rates for the last two years were: 2019 $900000 20% 2020 $900000 25% The amount that Rodd should report as an income tax refund receivable in 2021, assuming that it uses the carryback provisions and that the tax rate is 30% in 2021, is $225000. $270000. $315000. $180000.

$180000

Operating income and tax rates for C.J. Company's first three years of operations were as follows: Income Enacted tax rate 2020 $400000 25% 2021 ($1000000) 20% 2022 $1680000 30% Assuming that C.J. Company opts only to carryforward its 2021 NOL, what is the amount of deferred tax asset or liability that C.J. Company would report on its December 31, 2021 balance sheet? Amount Deferred tax asset or liability $200000 Deferred tax liability $250000 Deferred tax liability $300000 Deferred tax asset $200000 Deferred tax asset

$300000 Deferred tax asset

Cross Company reported the following results for the year ended December 31, 2021, its first year of operations: 2021 Income (per books before income taxes) $2000000 Taxable income 3200000 The disparity between book income and taxable income is attributable to a temporary difference which will reverse in 2022. What should Cross record as a net deferred tax asset or liability for the year ended December 31, 2021, assuming that the enacted tax rates in effect are 30% in 2021 and 25% in 2022? $360000 deferred tax liability $300000 deferred tax asset $300000 deferred tax liability $360000 deferred tax asset

$300000 deferred tax asset

Based on the following information, compute 2021 taxable income for South Co. assuming that its pre-tax accounting income for the year ended December 31, 2021 is $460000. Future taxable Temporary difference (deductible) amount Installment sales $384000 Depreciation $120000 Unearned rent ($400000) $964000 $564000 $444000 $356000

$356000

Watson Corporation prepared the following reconciliation for its first year of operations: Pretax financial income for 2021 $2700000 Tax exempt interest (150000) Originating temporary difference (450000) Taxable income $2100000 The temporary difference will reverse evenly over the next 2 years at an enacted tax rate of 30%. The enacted tax rate for 2021 is 20%. What amount should be reported in its 2021 income statement as the current portion of its provision for income taxes? $540000 $810000 $420000 $630000

$420000

Mitchell Corporation prepared the following reconciliation for its first year of operations: Pretax financial income for 2021 $1800000 Tax exempt interest (150000) Originating temporary difference (350000) Taxable income $1300000 The temporary difference will reverse evenly over the next 2 years at an enacted tax rate of 30%. The enacted tax rate for 2021 is 25%. In Mitchell's 2021 income statement, what amount should be reported for total income tax expense? $450000 $430000 $325000 $495000

$430000

Mathis Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $1200000 Estimated litigation expense 3000000 Installment sales (2400000) Taxable income $1800000 The estimated litigation expense of $3000000 will be deductible in 2022 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $1200000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $1200000 current and $1200000 noncurrent. The income tax rate is 20% for all years. The deferred tax liability to be recognized is $480000. $240000. $360000. $120000

$480000

Mathis Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $1200000 Estimated litigation expense 3000000 Installment sales (2400000) Taxable income $1800000 The estimated litigation expense of $3000000 will be deductible in 2022 when it is expected to be paid. The gross profit from the installment sales will be realized in the amount of $1200000 in each of the next two years. The estimated liability for litigation is classified as noncurrent and the installment accounts receivable are classified as $1200000 current and $1200000 noncurrent. The income tax rate is 20% for all years. The deferred tax asset to be recognized is $120000 noncurrent. $0. $600000 noncurrent. $120000 current.

$600000 noncurrent.

In 2021, Krause Company accrued, for financial statement reporting, estimated losses on disposal of unused plant facilities of $3600000. The facilities were sold in March 2022 and a $3600000 loss was recognized for tax purposes. Also in 2021, Krause paid $150000 in premiums for a two-year life insurance policy in which the company was the beneficiary. Assuming that the enacted tax rate is 20% in both 2021 and 2022, and that Krause paid $1170000 in income taxes in 2021, the amount reported as net deferred income taxes on Krause's balance sheet at December 31, 2021, should be a $720000 asset. $360000 asset. $360000 liability. $1020000 asset.

$720000 asset

Nickerson Corporation began operations in 2019. There have been no permanent or temporary differences to account for since the inception of the business. The following data are available: Year Enacted Tax Rate Taxable Income Taxes Paid 2019 35% $2000000 $700000 2020 30% 2400000 720000 2021 25% 2022 20% In 2021, Nickerson had an operating loss of $2480000. What amount of income tax benefits should be reported on the 2021 income statement due to this loss assuming that it uses the carryback provision? $744000 $844000 $772000 $496000

$844000

Lehman Corporation purchased a machine on January 2, 2020, for $4000000. The machine has an estimated 5-year life with no salvage value. The straight-line method of depreciation is being used for financial statement purposes and the following MACRS amounts will be deducted for tax purposes: 2020 $800000 2023 $460000 2021 1280000 2024 460000 2022 768000 2025 232000 Assuming an income tax rate of 20% for all years, the net deferred tax liability that should be reflected on Lehman's balance sheet at December 31, 2021 be $0 $96000 $68000 $6400

$96000

Operating income and tax rates for C.J. Company's first three years of operations were as follows: Income Enacted tax rate 2020 $400000 25% 2021 ($1000000) 20% 2022 $1680000 30% Assuming that C.J. Company opts to carryback its 2021 NOL, what is the amount of income taxes payable at December 31, 2022? $504000 $270000 $324000 $204000

324000

Mitchell Corporation prepared the following reconciliation for its first year of operations: Pretax financial income for 2021 $1800000 Tax exempt interest (150000) Originating temporary difference (350000) Taxable income $1300000 The temporary difference will reverse evenly over the next 2 years at an enacted tax rate of 30%. The enacted tax rate for 2021 is 25%. What amount should be reported in its 2021 income statement as the deferred portion of income tax expense? A) $105000 debit B) $125000 credit C) $125000 debit D) $105000 credit

A) $105,000 debit

An example of a permanent difference is proceeds from life insurance on officers. interest expense on money borrowed to invest in municipal bonds. insurance expense for a life insurance policy on officers. All of these answers are correct as they are all examples of permanent differences.

All of these answers are correct as they are all examples of permanent differences.

Deferred taxes should be presented on the balance sheet A) as either noncurrent or current. B) as reductions of the related asset or liability accounts. C) as a current amount. D) as a noncurrent amount.

As a noncurrent amount

Horner Corporation has a deferred tax asset at December 31, 2022 of $200000 due to the recognition of potential tax benefits of an operating loss carryforward. The enacted tax rates are as follows: 30% for 2019-2021; 25% for 2022; and 20% for 2023 and thereafter. Assuming that management expects that only 50% of the related benefits will actually be realized, a valuation account should be established in the amount of: A) $40000 B) $100000 C) $35000 D) $30000

B) $100,000

Khan, Inc. reports a taxable and financial loss of $2250000 for 2022. Its pretax financial income for the last two years was as follows: 2020: $900000 2021: $1200000 The amount that Khan, Inc. reports as a net loss for financial reporting purposes in 2022, assuming that it uses the carryback provisions, and that the tax rate is 20% for all periods affected, is A) $450000 loss. B) $0. C) $1800000 loss. D) $2250000 loss.

C) $1,800,000 loss.

A company records an unrealized loss on trading securities. This would result in what type of difference and in what type of deferred income tax? Type of Difference | Deferred Tax A) Permanent | Asset B) Permanent | Liability C) Temporary | Asset D) Temporary | Liability

C) Temporary | Asset

Recognizing a valuation allowance for a deferred tax asset requires that a company A) pass a recognition threshold, after assuming that it will be audited by taxing authorities. B) take an aggressive approach in its tax planning. C) consider all positive and negative information in determining the need for a valuation allowance. D) consider only the positive information in determining the need for a valuation allowance.

C) consider all positive and negative information in determining the need for a valuation allowance.

Taxable income of a corporation: A) differs from accounting income due to differences in intraperiod allocation between the two methods of income determination. B) is reported on the corporation's income statement. C) differs from accounting income because companies use the full accrual method for financial reporting but use the modified cash basis for tax reporting. D) is based on generally accepted accounting principles.

C) differs from accounting income because companies use the full accrual method for financial reporting but use the modified cash basis for tax reporting.

Hopkins Co. at the end of 2020, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income $3000000 Estimated litigation expense $4000000 Extra depreciation for taxes (6000000) Taxable income $ 1000000 The estimated litigation expense of $4000000 will be deductible in 2021 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $2000000 in each of the next 3 years. The income tax rate is 20% for all years. Income taxes payable is: A) $400000 B) $600000 C) $0 D) $200000.

D) $200,000

Machinery was acquired at the beginning of the year. Depreciation recorded during the life of the machinery could result in: Future Taxable Amounts | Future Deductible Amounts A) No | Yes B) Yes | No C) No | No D) Yes | Yes

D) Yes | Yes

Rowen, Inc. had pre-tax accounting income of $2700000 and a tax rate of 20% in 2021, its first year of operations. During 2021 the company had the following transactions: Received rent from Jane, Co. for 2022 $96000 Municipal bond income $120000 Depreciation for tax purposes in excess of book depreciation $60000 Installment sales profit to be taxed in 2022 $162000 At the end of 2021, which of the following deferred tax accounts and balances exist at December 31, 2021? Account Balance Deferred tax liability $31200 Deferred tax asset $19200 Deferred tax asset $31200 Deferred tax liability $19200

Deferred tax asset $19200

At the beginning of 2021, Pitman Co. purchased an asset for $1800000 with an estimated useful life of 5 years and an estimated salvage value of $150000. For financial reporting purposes the asset is being depreciated using the straight-line method; for tax purposes the double-declining-balance method is being used. Pitman Co.'s tax rate is 20% for 2021 and all future years. At the end of 2021, which of the following deferred tax accounts and balances is reported on Pitman's balance sheet? Account Balance Deferred tax asset $66000 Deferred tax liability $66000 Deferred tax liability $78000 Deferred tax asset $78000

Deferred tax liability $78000

Which of the following differences would result in future taxable amounts? Revenues or gains that are taxable before they are recognized in financial income. Revenues or gains that are recognized in financial income but are never included in taxable income. Expenses or losses that are tax deductible before they are recognized in financial income. Expenses or losses that are tax deductible after they are recognized in financial income.

Expenses or losses that are tax deductible before they are recognized in financial income.

At December 31, 2020 Raymond Corporation reported a deferred tax liability of $240000 which was attributable to a taxable temporary difference of $800000. The temporary difference is scheduled to reverse in 2024. During 2021, a new tax law increased the corporate tax rate from 20% to 30%. Raymond should record this change by debiting Income Tax Expense for $24000. Retained Earnings for $80000. Retained Earnings for $24000. Income Tax Expense for $80000.

Income Tax Expense for $80000.

Which of the following will not result in a temporary difference? Advance rental receipts Product warranty liabilities Installment sales Interest received on municipal obligations.

Interest received on municipal obligations

With regard to uncertain tax positions, the FASB requires that companies recognize a tax benefit when it is probable and can be reasonably estimated. there is at least a 51% probability that the uncertain tax position will be approved by the taxing authorities. it is more likely than not that the tax position will be sustained upon audit. Any of these choices exist.

It is more likely than not that the tax position will be sustained upon audit

Which of the following are temporary differences that are normally classified as expenses or losses that are deductible after they are recognized in financial income? Fines and expenses resulting from a violation of law. Prepaid expenses that are deducted on the tax return in the period paid. Depreciable property. Product warranty liabilities.

Product warranty liabilities

Which of the following is not considered a permanent difference? Premiums paid for life insurance on a company's CEO when the company is the beneficiary. Stock-based compensation expense. Interest received on municipal bonds. Fines resulting from violating the law.

Stock-based compensation expense

A company uses the equity method to account for an investment for financial reporting purposes. This would result in what type of difference and in what type of deferred income tax? Type of Difference Deferred Tax Permanent Asset Temporary Asset Permanent Liability Temporary Liability

Temporary liability

All of the following are procedures for the computation of deferred income taxes except to identify the types and amounts of existing temporary differences. measure the total deferred tax liability for taxable temporary differences. measure the total deferred tax liability for deductible temporary differences. determine taxes payable

measure the total deferred tax liability for deductible temporary differences.

A major distinction between temporary and permanent differences is permanent differences are not representative of acceptable accounting practice. temporary differences reverse themselves in subsequent accounting periods, whereas permanent differences do not reverse. temporary differences occur frequently, whereas permanent differences occur only once. once an item is determined to be a temporary difference, it maintains that status; however, a permanent difference can change in status with the passage of time.

temporary differences reverse themselves in subsequent accounting periods, whereas permanent differences do not reverse.


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