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Help me with this one in 3-4 hours maximum. I want all correct answers.
1.
A company would most likely choose the carryforward option for a net operating loss if the company expected
Answer
|
higher tax rates in the future compared to the past. |
|
lower tax rates in the future compared to the past. |
|
lower earnings in the future compared to the past. |
|
higher earnings in the future compared to the past. |
2 points
Question 2
1.
A deferred tax liability arising from the use of an accelerated method of depreciation for tax purposes and the straight-line method for financial reporting purposes would be classified on the balance sheet as
Answer
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a current liability. |
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a noncurrent liability. |
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a current liability for the portion of the temporary difference reversing within a year and a noncurrent liability for the remainder. |
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an offset to the accumulated depreciation reported on the balance sheet. |
2 points
Question 3
1.
All of the following can result in a temporary difference between pretax financial income and taxable income except
Answer
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payment of premiums for life insurance. |
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depreciation expense. |
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contingent liabilities. |
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product warranty costs. |
2 points
Question 4
1.
Alpha had taxable income of $1,500 during
2014
. Alpha used accelerated depreciation for tax purposes ($2,000) and straight-line depreciation for financial reporting purposes ($800). On December 30, 2014, Alpha collected the January
2015
rent of $600 on a lot it rents on a month-by-month basis to Zenith. Alpha’s pretax accounting income for 2014 would be
Answer
|
$900. |
|
$2,100. |
|
$3,300. |
|
$3,700. |
2 points
Question 5
1.
An example of a “deductible temporary difference” occurs when
Answer
|
the installment sales method is used for tax purposes, but the accrual method of recognizing sales revenue is used for financial reporting purposes. |
|
warranty expenses are recognized on the accrual basis for financial reporting purposes but recognized as the warranty conditions are met for tax purposes. |
|
accelerated depreciation is used for tax purposes but straight-line depreciation is used for accounting purposes. |
|
the completed-contract method of recognizing construction revenue is used for tax purposes, but the percentage-of-completion method is used for financial reporting purposes. |
2 points
Question 6
1.
An item that would create a permanent difference in pretax financial and taxable incomes would be
Answer
|
using accelerated depreciation for tax purposes and straight-line depreciation for book purposes. |
|
purchasing equipment previously leased with an operating lease in prior years. |
|
using the percentage-of-completion method on long-term construction contracts. |
|
paying fines for violation of laws. |
2 points
Question 7
1.
Which of the following creates a permanent difference between financial income and taxable income?
Answer
|
Interest received on municipal bonds |
|
|
Completed contract method of recognizing construction revenue |
|
|
Unearned rent revenue |
|
|
Accelerated cost recovery on plant and equipment |
2 points
Question 8
1.
Which of the following creates a temporary difference between financial and taxable income?
Answer
|
Fines from violation of law |
|
Interest on municipal bonds |
|
Premiums paid for officer’s life insurance (company is beneficiary) |
2 points
Question 9
1.
The data shown below represent the complete taxable income history for Confederacy Corporation. The tax rate was 35% throughout the entire period
2008
through 2015:
|
Taxable |
|||||||||||||||||||||||||||||||||||||||||
|
Year |
Income |
||||||||||||||||||||||||||||||||||||||||
| 2008 |
$ 15,000 |
||||||||||||||||||||||||||||||||||||||||
|
2009 |
$ 5,000 |
||||||||||||||||||||||||||||||||||||||||
|
2010 |
$ 30,000 |
||||||||||||||||||||||||||||||||||||||||
|
2011 |
$ 10,000 |
||||||||||||||||||||||||||||||||||||||||
|
2012 |
$(50,000) |
||||||||||||||||||||||||||||||||||||||||
|
2013 |
$(10,000) |
||||||||||||||||||||||||||||||||||||||||
| 2014 |
$ 25,000 |
||||||||||||||||||||||||||||||||||||||||
| 2015 | |||||||||||||||||||||||||||||||||||||||||
If the company always chooses the carryback, carryforward option, what is the tax liability for 2014?
Answer
|
$1,750 |
|
|
$8,750 |
|
|
$5,250 |
|
|
$0 |
2 points
Question 10
1.
Which of the following represents a permanent difference?
Answer
|
Point-of-sale revenue recognition for financial reporting purposes, installment method for tax purposes |
|
Goodwill amortization deducted on the tax return but not amortized for financial reporting purposes |
|
Straight-line depreciation for financial reporting purposes, accelerated depreciation for tax purposes |
|
Carryback, carryforward option for taxes, no such option for financial reporting purposes |
2 points
Question 11
1.
Which of the following is the most likely item to result in a deferred tax asset?
Answer
|
Using accelerated depreciation for tax purposes but straight-line depreciation for accounting purposes |
|
Using the completed-contract method of recognizing construction revenue tax purposes, but using percentage-of-completion method for financial reporting purposes |
|
Prepaid expenses |
|
Unearned revenues |
2 points
Question 12
1.
Which of the following items results in a temporary difference deductible amount for a given year?
Answer
|
Premiums on officer’s life insurance (company is beneficiary) |
|
Premiums on officer’s life insurance (officer is beneficiary) |
|
Vacation pay accrual |
|
Accelerated depreciation for tax purposes; straight-line for financial reporting purposes |
2 points
Question 13
1.
Amengual Corporation began operations in 2011 and had operating losses of $400,000 in 2012 and $300,000 in 2013. For the year ended December 31, 2014, Amengual had a pretax financial income of $600,000. For 2012 and 2013, assume an enacted tax rate of 30 percent, and for 2014 a 35 percent tax rate. There were no temporary differences in any of the years. In Amengual’s 2014 income statement, how much should be reported as income tax expense?
Answer
|
$30,000 |
|
$180,000 |
|
$210,000 |
2 points
Question 14
1.
In 2014, Ryan Corporation reported $85,000 net income before income taxes. The income tax rate for 2014 was 30 percent. Ryan had an unused $65,000 net operating loss carryforward arising in 2013 when the tax rate was 35 percent. The income tax expense Ryan would report for 2014 would be
Answer
|
$7,000. |
|
$6,000. |
|
$24,600. |
|
$32,000. |
2 points
Question 15
1.
The purpose of an interperiod income tax allocation is to
Answer
|
allow reporting entities to fully utilize tax losses carried forward from a previous year. |
|
allow reporting entities whose tax liabilities vary significantly from year to year to smooth payments to taxing agencies. |
|
recognize an asset or liability for the tax consequences of temporary differences that exist at the balance sheet date. |
|
amortize the deferred tax liability shown on the balance sheet. |
