Acct 3120 - 15 & 16

From the perspective of the lessee, leases may be classified as either: Finance or operating. Finance or sales-type without selling profit. Sales-type or operating. Sales-type without selling profit or sales-type with selling profit.

Finance or Operating

A deferred tax asset represents a: Future tax refund. Future income tax benefit. Future amount of money to be paid out. Future cash collection.

Future income tax benefit.

Woody Corp. had taxable income of $8,100 in the current year. The amount of depreciation reported in the tax return was $3,200, while the amount of depreciation reported in the income statement was $900. Assuming no other differences between tax and accounting income, Woody's pretax accounting income was: $11,300. $4,900. $10,400. $5,800.

$10400

During the current year, Stern Company had pretax accounting income of $46 million. Stern's only temporary difference for the year was rent received for the following year in the amount of $13 million. Stern's taxable income for the year would be: $46 million. $51 million. $33 million. $59 million.

$59 Million

In reconciling net income to taxable income, interest earned on municipal bonds is: A reversing difference. Ignored. A permanent difference. A temporary difference.

A permanent difference.

Which of the following circumstances creates a future deductible amount? Prepaid advertising expense. Sales of property (installment method for tax purposes). Earning of non-taxable interest on municipal bonds. Accrued warranty expenses.

Accrued warranty expense

Of the following temporary differences, which one ordinarily creates a deferred tax asset? Installment sales for tax reporting. Accrued warranty expense. Accelerated depreciation for tax reporting. Unrealized gain from recording investments at fair value.

Accrued warranty expense.

For the lessee to account for a lease as a finance lease, the lease must meet: All five of the criteria specified by GAAP regarding accounting for leases. Any two of the criteria specified by GAAP regarding accounting for leases. Any one of the five criteria specified by GAAP regarding accounting for leases. Any one of the six criteria specified by GAAP regarding accounting for leases.

Any one of the five criteria specified by GAAP regarding accounting for leases.

For the lessor to account for a lease as a sales-type lease, the lease must meet: More than one of the five criteria specified by GAAP regarding accounting for leases. Any one of the five criteria specified by GAAP regarding accounting for leases. All five of the criteria specified by GAAP regarding accounting for leases. Any one of first five classification criteria and both of the last two additional conditions specified by GAAP regarding accounting for leases.

Any one of the five criteria specified by GAAP regarding accounting for leases.

GAAP regarding accounting for income taxes requires which of the following procedures? Computation of deferred tax assets and liabilities based on temporary differences. Computation of income tax expense based on taxable income. Computation of deferred income tax based on temporary and permanent differences. Computation of deferred income tax based on permanent differences.

Computation of deferred tax assets and liabilities based on temporary differences.

Using straight-line depreciation for financial reporting purposes and accelerated depreciation for tax purposes in the first year of an asset's life creates a: Deferred tax asset. Deferred tax liability. Future deductible amount. Permanent difference not requiring inter-period tax allocation.

Deferred tax liability.

Which of the following differences between financial accounting and tax accounting ordinarily creates a deferred tax liability? None of these answer choices are correct. Unrealized losses from recording investments at fair value. Depreciation early in the life of an asset. Rent collected in advance.

Depreciation early in the life of an asset.

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? Long term. Finance. Short term. Operating.

Finance

Cook the Books is the lessee in a lease agreement. From the perspective of the lessee, the lease may be classified as: operating, finance, or sales-type. operating or sales-type. operating, sales-type, indirect financing. operating or finance.

Operating or Finance

ABC Books is the lessor in a lease agreement. From the perspective of the lessor, the lease may be classified as: operating, finance, or sales-type. operating, sales-type, indirect financing. operating or sales-type. operating or finance.

Operating or sales-type

From the perspective of the lessor, two possible lease classifications are: Financing or sales-type. Operating or financing. Operating or sales-type. Sales-type or indirect financing.

Operating or sales-type.

Which of the following differences between financial accounting and tax accounting ordinarily creates a deferred tax asset? The installment sales method for tax purposes. None of these answer choices are correct. Revenue collected in advance. Tax depreciation in excess of book depreciation.

Revenue collected in advance.

The five criteria provided in GAAP for distinguishing a finance lease from an operating lease do not include: The noncancelable lease term is for the major part of the remaining economic life of the underlying asset. The agreement specifies that ownership transfers at the end of the lease term. The collectibility of the lease payments must be reasonably predictable. The agreement grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise.

The collectibility of the lease payments must be reasonably predictable.

Which of the following is not among the criteria for classifying a lease as a finance lease? The present value of the sum of the lease payments and any residual value guaranteed by the lessee that isn't already reflected in the lease payments equals or exceeds substantially all of the fair value of the underlying asset. The lease term is for substantially all of the remaining economic life of the underlying asset. The agreement contains an option to purchase the underlying asset that the lessee is reasonably certain to exercise. The agreement specifies that ownership of the asset transfers to the lessee.

The lease term is for substantially all of the remaining economic life of the underlying asset.

Financial statement disclosure of the components of income tax expense: Is not necessary when only permanent differences exist. Must be made on the face of the income statement. Must include the amount of cash paid for taxes. Usually is included in the disclosure notes.

Usually is included in the disclosure notes.

Which of the following causes a temporary difference between taxable and pretax accounting income? The dividends received deduction. Life insurance proceeds received due to the death of an executive. Investment expenses incurred to generate tax-exempt income. MACRS used for depreciating equipment.

MACRS used for depreciating equipment.

One of the five criteria for a finance lease specifies that the lease term be equal to or greater than: the major part of the remaining economic life of the leased property. a meaningful part of the remaining economic life of the leased property. the entire amount of the remaining economic life of the leased property. a non-insignificant part of the remaining economic life of the leased property.

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