acct 203 chp 19,20, 21 quiz
The following information is related to the pension plan of Karl, Inc. for 2021. Actual return on plan assets $400,000 Amortization of net gain 165,000 Amortization of prior service cost due to increase in benefits 300,000 Expected return on plan assets 460,000 Interest on projected benefit obligation 725,000 Service cost 1,700,000 Pension expense for 2021 is: $2,490,000. $2,100,000. $2,430,000. $2,160,000.
$2,100,000.
On December 31, 2021, Lang Corporation leased a ship from Fort Company for an eight-year period expiring December 30, 2029. Equal annual payments of $500,000 are due on December 31 of each year, beginning with December 31, 2021. The lease is properly classified as a finance lease on Lang 's books. The present value at December 31, 2021 of the eight lease payments over the lease term discounted at 10% is $2,934,213. Assuming all payments are made on time, the amount that should be reported by Lang Corporation as the total liability for finance leases on its December 31, 2022 balance sheet is $2,177,634. $2,727,635. $2,500,397. $3,000,000.
$2,177,634.
Use the following information to answer questions 7 and 8: Amanda 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 $3,000,000 Estimated litigation expense 4,000,000 Extra depreciation for taxes (6,000,000) Taxable income $ 1,000,000 The estimated litigation expense of $4,000,000 will be deductible in 2021 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $2,000,000 in each of the next three years. The income tax rate is 20% for all years. Amanda Co. reports 2020 Income taxes payable of $200,000. $0. $600,000. $900,000.
$200,000.
The following information relates to the pension plan for the employees of Danny Co.: 12/31/20 12/31/21 PBO $10,458,000 $14,007,000 Plan Assets 10,920,000 12,054,000 AOCI-net g/l (1,512,000) (1,680,000) Danny estimates that the average remaining service life of employees is 16 years. Danny's contribution was $1,323,000 in 2021 and benefits paid were $987,000. What about of the AOCI - net (gain) amortized in 2021? $0. $26,775. $26,250. $20,344.
$26,250.
Ashok Company deducts insurance expense of $210,000 for tax purposes in 2021, but the expense is not yet recognized for accounting purposes. In 2022, 2023, and 2024, no insurance expense will be deducted for tax purposes, but $70,000 of insurance expense will be reported for accounting purposes in each of these years (2022-2024). Ashok Company has a tax rate of 20% and income taxes payable of $180,000 at the end of 2021. There were no deferred taxes at the beginning of 2021. What is the amount of the deferred tax liability at the end of 2022 for the insurance policy? $28,000 $42,000 $14,000 $0
$28,000
Mika, Inc. had pre-tax accounting income of $2,700,000 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 $ 96,000 Municipal bond income $120,000 Depreciation for tax purposes in excess of book depreciation $60,000 Installment sales profit to be taxed in 2022 $162,000 For 2021, what is the amount of income taxes payable for Mika, Inc? $490,800 $452,400 $514,800 $579,600
$490,800
Use the following information to answer questions 7 and 8: Amanda 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 $3,000,000 Estimated litigation expense 4,000,000 Extra depreciation for taxes (6,000,000) Taxable income $ 1,000,000 The estimated litigation expense of $4,000,000 will be deductible in 2021 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $2,000,000 in each of the next three years. The income tax rate is 20% for all years. Amanda Co. reports a deferred tax asset in 2020 of: $800,000. $200,000. $400,000. $600,000.
$800,000.
Lehman Corporation purchased a machine on January 2, 2020, for $4,000,000. 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 $800,000 2023 $460,000 2021 1,280,000 2024 460,000 2022 768,000 2025 232,000 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 $96,000 $89,600 $6,400 $0
$96,000
Which of the following temporary differences results in a deferred tax asset in the year the temporary difference originates? 1. Accrual for product warranty liability. 2. Subscriptions received in advance. 3. Prepaid insurance expense. 1 and 2 only 2 only 3 only 1 and 3 only
1 and 2 only
On January 2, 2021, Gold Star Leasing Company leases equipment to Brick Co. with 5 equal annual payments of $160,000 each, payable beginning January 2, 2021. Brick Co. agrees to guarantee the $150,000 residual value of the asset at the end of the lease term. The expected value of the residual value is $50,000. Brick's incremental borrowing rate is 10%, however it knows that Gold Star's implicit interest rate is 8%. What amount is recorded for the ROU Asset on January 2, 2021? PV Annuity Due PV Ordinary Annuity PV Single Sum 8%, 5 periods 4.31213 3.99271 .68508 10%, 5 periods 4.16986 3.79079 .62092 758,449 598,449 707,342 689,940
758,449
Which of the following differences would result in future taxable amounts? 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. 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.
Which of the following will not result in a temporary difference? Interest received on municipal obligations. Product warranty liabilities Advance rental receipts Installment sales
Interest received on municipal obligations.
Taxable income of a corporation differs from pretax financial income because of Permanent and temporary differences Permanent differences only Temporary differences only Neither permanent or temporary differences
Permanent and temporary differences
What impact does a purchase option have on the present value of the lease payments computed by the lessee? The lease payments would be increased by the option price. There is no impact as the option does not enter into the transaction until the end of the lease term. The lessee must increase the present value of the lease payments by the present value of the option price. The lessee must increase the present value of the lease payments by the present value of the option price if the option price is a "bargain".
The lessee must increase the present value of the lease payments by the present value of the option price if the option price is a "bargain".
A single lease expense is recognized on the income statement for a finance lease. an operating lease. both a finance lease and an operating lease. neither a finance lease or an operating lease.
an operating lease
On January 1, 2021, Sun Corporation signed a five-year noncancelable lease for equipment. The terms of the lease called for Sun to make annual payments of $180,000 at the beginning of each year for five years with title passing to Sun at the end of this period. The equipment has an estimated useful life of 7 years and no salvage value. Sun uses the straight-line method of depreciation for all of its fixed assets. Sun accordingly accounts for this lease transaction as a finance lease. The lease payments were determined to have a present value of $750,578 at an effective interest rate of 10%. With respect to this lease, for 2021 Sun should record rent expense of $180,000. interest expense of $57,058 and amortization expense of $107,225. interest expense of $57,058 and amortization expense of $150,116. interest expense of $75,058 and amortization expense of $107,225.
interest expense of $57,058 and amortization expense of $107,225.
Gains and losses that relate to the assumptions used to value PBO should be recorded currently as an adjustment to pension expense in the period incurred. recorded in OCI in the current period and in the future by applying the corridor method which provides the amount to be amortized into pension expense. amortized over a 15-year period. recorded only if a loss is determined.
recorded in OCI in the current period and in the future by applying the corridor method which provides the amount to be amortized into pension expense.
When a company amends a pension plan, for accounting purposes, prior service costs should be reported as an expense in the period the plan is amended. amortized in accordance with procedures used for income tax purposes. treated as a prior period adjustment because no future periods are benefited. recorded in other comprehensive income (PSC).
recorded in other comprehensive income (PSC).
The computation of pension expense includes all the following except interest on projected benefit obligation. amortization of prior service cost. expected return on plan assets. service cost component measured using current salary levels.
service cost component measured using current salary levels.
A major distinction between temporary and permanent differences is temporary differences reverse themselves in subsequent accounting periods, whereas permanent differences do not reverse. permanent differences are not representative of acceptable accounting practice. 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.
