Deck 19: Accounting for Income Taxes

Question 1

Companies should consider both positive and negative evidence to determine whether, based on the weight of available evidence, it needs adjust the deferred tax asset.

Answer 1

True

Question 2

Examples of taxable temporary differences are subscriptions received in advance and advance rental receipts.

Answer 2

False

Question 3

Companies classify the balances in the deferred tax accounts on the statement of financial position as non-current assets or non-current liabilities.

Answer 3

True

Question 4

A possible source of taxable income that may be available to realize a tax benefit for loss carryforwards is existing taxable temporary differences.

Question 5

A deferred tax liability represents the increase in taxes payable in future years as a result of taxable temporary differences existing at the end of the current year.

Question 6

The IASB believes that the deferred tax method is the most consistent method for accounting for income taxes.

Question 7

Companies must consider presently enacted changes in the tax rate that become effective in future years when determining the tax rate to apply to existing temporary differences.

Question 8

When a change in the tax rate is enacted, the effect is reported as an adjustment to income tax payable in the period of the change.

Question 9

Deductible amounts cause taxable income to be greater than pretax financial income in the future as a result of existing temporary differences.

Question 10

Permanent differences do not give rise to future taxable or deductible amounts.

Question 11

Pretax financial income is the amount used to compute income tax payable.

Question 12

A company reduces a deferred tax asset if it is possible that it will not realize some portion of the deferred tax asset.

Question 13

The tax effect of a loss carryforward represents future tax savings and results in the recognition of a deferred tax asset.

Question 14

Under the loss carryback approach, companies must apply a current year loss to the most recent year first and then to an earlier year.

Question 15

An individual deferred tax asset or liability is classified as current or non-current based on the classification of the related asset\liability for financial reporting purposes.

Question 16

Taxable amounts increase taxable income in future years.

Question 17

Taxable temporary differences will result in taxable amounts in future years when the related assets are recovered.

Question 18

Taxable income is a tax accounting term and is also referred to as income before taxes.

Question 19

A deferred tax asset represents the increase in taxes refundable in future years as a result of deductible temporary differences existing at the end of the current year.

Question 20

A company should add a decrease in a deferred tax liability to income tax payable in computing income tax expense.

Question 21

Machinery was acquired at the beginning of the year.Depreciation recorded during the life of the machinery could result in

^{P<\sup>27.A temporary difference arises when a revenue item is reported for tax purposes in a period}

Question 22

Recognition of tax benefits in the loss year due to a loss carryforward requires

A)the establishment of a deferred tax liability.
B)the establishment of a deferred tax asset.
C)the establishment of an income tax refund receivable.
D)only a note to the financial statements.

Question 23

An example of a permanent difference is

A)fines resulting from a violation of law.
B)interest expense on money borrowed to invest in government bonds.
C)percentage depletion of natural resources.
D)all of these.

Question 24

Stuart Corporation's taxable income differed from its accounting income computed for this past year.An item that would create a permanent difference in accounting and taxable incomes for Stuart would be

A)a balance in the Unearned Rent account at year end.
B)using accelerated depreciation for tax purposes and straight-line depreciation for book purposes.
C)a fine resulting from violations of environmental regulations.
D)making installment sales during the year.

Question 25

Which of the following statements is correct regarding permanent differences under IFRS?

A)Permanent differences result from items that enter into pretax financial income but never into taxable income.
B)Permanent differences result from items that enter into taxable income but never into pretax financial income.
C)Permanent differences affect only the period in which they occur.
D)All of the choices are correct.

Question 26

Major reasons for disclosure of deferred income tax information is (are)

A)better assessment of quality of earnings.
B)better predictions of future cash flows.
C)that it may be helpful in predicating future cash flows for operating loss carryforwards.
D)all of these.

Question 27

Which of the following will not result in a temporary difference?

A)Product warranty liabilities
B)Advance rental receipts
C)Gain on involuntary conversion of non-monetary asset.
D)All of these will result in a temporary difference.

Question 28

A company records an unrealized loss on short-term securities.This would result in what type of difference and in what type of deferred income tax?

Question 29

Each of the following is determined according to IFRS except

A)income before taxes.
B)taxable income.
C)income for financial reporting purposes.
D)income for book purposes.

Question 30

Tax rates other than the current tax rate may be used to calculate the deferred income tax amount on the statement of financial position if

A)it is probable that a future tax rate change will occur.
B)it appears likely that a future tax rate will be greater than the current tax rate.
C)the future tax rates have been enacted or substantially enacted.
D)it appears likely that a future tax rate will be less than the current tax rate.

Question 31

The deferred tax expense is the

A)increase in balance of deferred tax asset minus the increase in balance of deferred tax liability.
B)increase in balance of deferred tax liability minus the increase in balance of deferred tax asset.
C)increase in balance of deferred tax asset plus the increase in balance of deferred tax liability.
D)decrease in balance of deferred tax asset minus the increase in balance of deferred tax liability.

Question 32

In determining whether to adjust a deferred tax asset, a company should

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

Question 33

Under IFRS

A)"probable" is defined as a level of likelihood of at least slightly more than 60%.
B)a company should reduce a deferred tax asset when it's likely that some or all of it will not be recognized.
C)a company considers only positive evidence when determining whether to recognize a deferred tax asset.
D)deferred tax assets must be evaluated at the end of each accounting period.

Question 34

Under IFRS companies are required to provide a reconciliation between actual tax expense and the applicable tax rate.The purpose(s) of this reconciliation include
I)Making better prediction of future cash flow.
II)Predicating future cash flows for operating loss carryforwards.
III)Assessing the composition of the net deferred income tax liability.
IV)Assessing quality of earnings.

A)I, III, and IV only.
B)I, II and IV only.
C)I and IV only.
D)I, II, III and IV.

Question 35

Which of the following is not considered a permanent difference?

A)Interest received on government obligations.
B)Fines resulting from violating the law.
C)Percentage depletion of natural resources.
D)Stock-based compensation expense.

Question 36

Which of the following temporary differences results in a deferred tax asset in the year the temporary difference originates?
I)Accrual for product warranty liability.
II)Subscriptions received in advance.
III)Prepaid insurance expense.

A)I and II only.
B)II only.
C)III only.
D)I and III only.

Question 37

A company uses the equity method to account for an investment.This would result in what type of difference and in what type of deferred income tax?

Question 38

An assumption inherent in a company's IFRS statement of financial position is that companies recover and settle the assets and liabilities at

A)the amount that is probable where "probable" means a level of likelihood of at least more than 50%.
B)the present value of future cash flows.
C)their reported amounts.
D)their net realizable value.

Question 39

Under IFRS deferred tax assets are recognized for
I)Deductible temporary differences.
II)Deductible permanent differences.
III)Operating loss carryforwards.
IV)Operating loss carrybacks.

A)I, II, and III.
B)I and III only.
C)I and IV only.
D)II and III only.

Question 40

Taxable income of a corporation

A)differs from accounting income due to differences in intraperiod allocation between the two methods of income determination.
B)differs from accounting income due to differences in interperiod allocation and permanent differences between the two methods of income determination.
C)is based on international financial reporting standards.
D)is reported on the corporation's income statement.
22 Taxable income of a corporation differs from pretax financial income because of

Question 41

Use the following information for questions.
Hopkins Co.at the end of 2010, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

The estimated litigation expense of $1,000,000 will be deductible in 2011 when it is expected to be paid.Use of the depreciable assets will result in taxable amounts of $500,000 in each of the next three years.The income tax rate is 30% for all years.
The net deferred tax liability to be recognized is

A)$750,000.
B)$450,000.
C)$300,000.
D)$150,000.

Question 42

Use the following information for questions.
At the beginning of 2012, Pitman Co.purchased an asset for $600,000 with an estimated useful life of 5 years and an estimated residual value of $50,000.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 40% for 2012 and all future years.
Lehman Corporation purchased a machine on January 2, 2009, for $2,000,000.The machine has an estimated 5-year life with no residual value.The straight-line method of depreciation is being used for financial statement purposes and the following accelerated depreciation amounts will be deducted for tax purposes:

Assuming an income tax rate of 30% for all years, the net deferred tax liability that should be reflected on Lehman's statement of financial position at December 31, 2010, should be

Question 43

Use the following information for questions.
Hopkins Co.at the end of 2010, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

The estimated litigation expense of $1,000,000 will be deductible in 2011 when it is expected to be paid.Use of the depreciable assets will result in taxable amounts of $500,000 in each of the next three years.The income tax rate is 30% for all years.
Stephens Company has a deductible temporary difference of $2,000,000 at the end of its first year of operations.Its tax rate is 40 percent.Stephens has $1,800,000 of income taxes payable.At the end of the first year, after a careful review of all available evidence, Stephens determines that it is probable that it will not realize $200,000 of this deferred tax asset.At the end of the second year of operations, Stephens Company determines that it expects to realize $1,850,000 of this deferred tax assets.On Stephens Company's income statement for the second year, what amount of income tax expense will it report related to the temporary difference, and is the amount a debit or credit?

A)$40,000 credit.
B)$40,000 debit.
C)$20,000 debit.
D)$20,000 credit.

Question 44

Use the following information for questions.
Hopkins Co.at the end of 2010, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

The estimated litigation expense of $1,000,000 will be deductible in 2011 when it is expected to be paid.Use of the depreciable assets will result in taxable amounts of $500,000 in each of the next three years.The income tax rate is 30% for all years.
In 2010, Krause Company accrued, for financial statement reporting, estimated losses on disposal of unused plant facilities of $1,500,000.The facilities were sold in March 2011 and a $1,500,000 loss was recognized for tax purposes.Also in 2010, Krause paid $100,000 in fines for violation of environmental regulations.Assuming that the enacted tax rate is 30% in both 2010 and 2011, and that Krause paid $780,000 in income taxes in 2010, the amount reported as net deferred income taxes on Krause's statement of financial position at December 31, 2010, should be a

A)$420,000 asset.
B)$360,000 asset.
C)$360,000 liability.
D)$450,000 asset.

Question 45

Deferred taxes should be presented on the statement of financial position

A)as one net debit or credit amount.
B)as a net amount in the non-current section.
C)in two amounts: one for the net debit amount and one for the net credit amount.
D)as reductions of the related asset or liability accounts.

Question 46

Which of the following statements is incorrect with regards to IFRS and U.S.GAAP?

A)With regard to uncertain tax positions, under IFRS, all potential liabilities must be recognized.
B)The tax effects related to certain items are reported inequity under U.S.GAAP, under IFRS the tax effects are charged or credited to home.
C)U.S.GAAP uses an impairment approach for deferred tax assets.The deferred tax assets.The deferred tax asset is recognized in full and reduced by a valuation account if it is more likely than not all or a portion of the deferred tax asset will not be realized.
D)U.S.GAAP classifies deferred taxes based on the classification of the assets or liability to which it relates.

Question 47

All of the following are procedures for the computation of deferred income taxes except to

A)identify the types and amounts of existing temporary differences and carryforwards.
B)measure the deferred tax liability for taxable temporary differences.
C)measure the deferred tax asset for deductible temporary differences and loss carrybacks.
D)All of these are procedures in computing deferred income taxes.

Question 48

The IASB believes that the asset-liability method is the most consistent method for accounting for income taxes.Basic principles of this method include
I)A current tax liability or asset is recognized for the estimated taxes payable or refundable on the tax return for the current year.
II)A deferred tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences and carryforwards.
III)The measurement of current and deferred tax liabilities and assets, is based on provisions of the enacted tax law.
IV)The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized.

A)I, II and only.
B)II and III only.
C)I, II, and IV only.
D)I, II, III and IV.

Question 49

Use the following information for questions.
Hopkins Co.at the end of 2010, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

The estimated litigation expense of $1,000,000 will be deductible in 2011 when it is expected to be paid.Use of the depreciable assets will result in taxable amounts of $500,000 in each of the next three years.The income tax rate is 30% for all years.
Income tax payable is

A)$0.
B)$75,000.
C)$150,000.
D)$225,000.

Question 50

Use the following information for questions.
Hopkins Co.at the end of 2010, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

The estimated litigation expense of $1,000,000 will be deductible in 2011 when it is expected to be paid.Use of the depreciable assets will result in taxable amounts of $500,000 in each of the next three years.The income tax rate is 30% for all years.
Stephens Company has a deductible temporary difference of $2,000,000 at the end of its first year of operations.Its tax rate is 40 percent.Stephens has $1,800,000 of income taxes payable.At the end of the first year, after a careful review of all available evidence, Stephens determines that it is probable that it will not realize $200,000 of this deferred tax asset.At the end of the second year of operations, Stephens Company determines that it expects to realize $1,850,000 of this deferred tax assets.On Stephens Company's statement of financial position at the end of its second year of operations, what is the amount of deferred tax asset?

A)$800,000.
B)$740,000.
C)$60,000.
D)$720,000

Question 51

Use the following information for questions.
Hopkins Co.at the end of 2010, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

The estimated litigation expense of $1,000,000 will be deductible in 2011 when it is expected to be paid.Use of the depreciable assets will result in taxable amounts of $500,000 in each of the next three years.The income tax rate is 30% for all years.
Cross Company reported the following results for the year ended December 31, 2010, its first year of operations:

The disparity between book income and taxable income is attributable to a temporary difference which will reverse in 2011.What should Cross record as a net deferred tax asset or liability for the year ended December 31, 2010, assuming that the enacted tax rates in effect are 40% in 2010 and 35% in 2011?

A)$180,000 deferred tax liability
B)$157,500 deferred tax asset
C)$180,000 deferred tax asset
D)$157,500 deferred tax liability

Question 52

Accounting for income taxes can result in the reporting of deferred taxes as any of the following except

A)a current or non-current asset.
B)a current or non-current liability.
C)a contra-asset account.
D)All of these are acceptable methods of reporting deferred taxes.

Question 53

Use the following information for questions.
Hopkins Co.at the end of 2010, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

The estimated litigation expense of $1,000,000 will be deductible in 2011 when it is expected to be paid.Use of the depreciable assets will result in taxable amounts of $500,000 in each of the next three years.The income tax rate is 30% for all years.
Stephens Company has a deductible temporary difference of $2,000,000 at the end of its first year of operations.Its tax rate is 40 percent.Stephens has $1,800,000 of income taxes payable.After a careful review of all available evidence, Stephens determines that it is probable that it will not realize $200,000 of this deferred tax asset.On Stephens Company's statement of financial position at the end of its first year of operations, what is the amount of deferred tax asset?

A)$2,000,000
B)$1,800,000
C)$800,000
D)$720,000

Question 54

Use the following information for questions.
At the beginning of 2012, Pitman Co.purchased an asset for $600,000 with an estimated useful life of 5 years and an estimated residual value of $50,000.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 40% for 2012 and all future years.
At the end of 2012, what is the book basis and the tax basis of the asset?

Question 55

Use the following information for questions.
At the beginning of 2012, Pitman Co.purchased an asset for $600,000 with an estimated useful life of 5 years and an estimated residual value of $50,000.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 40% for 2012 and all future years.
At the end of 2012, which of the following deferred tax accounts and balances is reported on Pitman's statement of financial position?

Question 56

Use the following information for questions.
Mathis Co.at the end of 2010, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

The estimated litigation expense of $1,250,000 will be deductible in 2012 when it is expected to be paid.The gross profit from the installment sales will be realized in the amount of $500,000 in each of the next two years.The estimated liability for litigation is classified as non-current and the installment accounts receivable are classified as $500,000 current and $500,000 noncurrent.The income tax rate is 30% for all years.
The net deferred tax asset to be recognized is

A)$0.
B)$150,000.
C)$375,000.
D)$225,000.

Question 57

Use the following information for questions.
Mathis Co.at the end of 2010, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

The estimated litigation expense of $1,250,000 will be deductible in 2012 when it is expected to be paid.The gross profit from the installment sales will be realized in the amount of $500,000 in each of the next two years.The estimated liability for litigation is classified as non-current and the installment accounts receivable are classified as $500,000 current and $500,000 noncurrent.The income tax rate is 30% for all years.
The income tax expense is

A)$150,000.
B)$225,000.
C)$250,000.
D)$500,000.

Question 58

Use the following information for questions.
Hopkins Co.at the end of 2010, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

The estimated litigation expense of $1,000,000 will be deductible in 2011 when it is expected to be paid.Use of the depreciable assets will result in taxable amounts of $500,000 in each of the next three years.The income tax rate is 30% for all years.
Link Sink Manufacturing has a deferred tax asset account with a balance of $300,000 at the end of 2012 due to a single cumulative temporary difference of $750,000.At the end of 2013, this same temporary difference has increased to a cumulative amount of $1,000,000.Taxable income for 2013 is $1,700,000.The tax rate is 40% for all years.Assuming it's probable that 70% of the deferred tax asset will be realized, what amount will be reported on Link Sink's statement of financial position for the deferred tax asset at December 31, 2013?

A)$400,000.
B)$280,000.
C)$700,000.
D)$680,000.

Question 59

The IASB believes that the __________________ method is the most consistent method for accounting for income taxes.

A)Asset-liability.
B)Income statement.
C)Statement of financial position.
D)Revenue-expense.

Question 60

Use the following information for questions.
Hopkins Co.at the end of 2010, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

The estimated litigation expense of $1,000,000 will be deductible in 2011 when it is expected to be paid.Use of the depreciable assets will result in taxable amounts of $500,000 in each of the next three years.The income tax rate is 30% for all years.
Eckert Corporation's partial income statement after its first year of operations is as follows:

Eckert uses the straight-line method of depreciation for financial reporting purposes and accelerated depreciation for tax purposes.The amount charged to depreciation expense on its books this year was $1,500,000.No other differences existed between book income and taxable income except for the amount of depreciation.Assuming a 30% tax rate, what amount was deducted for depreciation on the corporation's tax return for the current year?

A)$1,200,000
B)$1,425,000
C)$1,500,000
D)$1,800,000

Question 61

Use the following information for questions.
Mitchell Corporation prepared the following reconciliation for its first year of operations:

The temporary difference will reverse evenly over the next two years at an enacted tax rate of 40%.The enacted tax rate for 2011 is 35%.
In Mitchell's 2011 income statement, what amount should be reported for total income tax expense?

A)$330,000
B)$315,000
C)$300,000
D)$210,000

Question 62

Use the following information for questions.
Rowen, Inc.had pre-tax accounting income of $900,000 and a tax rate of 40% in 2010, its first year of operations.During 2010 the company had the following transactions:

At the end of 2010, which of the following deferred tax accounts and balances is reported on Rowen, Inc.'s statement of financial position?

Question 63

Use the following information for questions.
Lyons Company deducts insurance expense of $84,000 for tax purposes in 2010, but the expense is not yet recognized for accounting purposes.In 2011, 2012, and 2013, no insurance expense will be deducted for tax purposes, but $28,000 of insurance expense will be reported for accounting purposes in each of these years.Lyons Company has a tax rate of 40% and income taxes payable of $72,000 at the end of 2010.There were no deferred taxes at the beginning of 2010.
What is the amount of the deferred tax liability at the end of 2010?

A)$33,600
B)$28,800
C)$12,000
D)$0

Question 64

Based on the following information, compute 2011 taxable income for South Co.assuming that its pre-tax accounting income for the year ended December 31, 2011 is $230,000.

Question 65

Use the following information for questions.
Mitchell Corporation prepared the following reconciliation for its first year of operations:

The temporary difference will reverse evenly over the next two years at an enacted tax rate of 40%.The enacted tax rate for 2011 is 35%.
Ferguson Company has the following cumulative taxable temporary differences:

The tax rate enacted for 2011 is 40%, while the tax rate enacted for future years is 30%.Taxable income for 2011 is $2,400,000 and there are no permanent differences.Ferguson's pretax financial income for 2011 is

A)$3,750,000.
B)$2,790,000.
C)$2,010,000.
D)$1,050,000.

Question 66

Duncan Inc.uses the accrual method of accounting for financial reporting purposes and appropriately uses the installment (cash) basis of accounting for income tax purposes.Profits of $300,000 recognized for books in 2010 will be collected in the following years:

The enacted tax rates are: 40% for 2010, 35% for 2011, and 30% for 2012 and 2013.Taxable income is expected in all future years.What amount should be included in the December 31, 2010, statement of financial position for the deferred tax liability related to the above temporary difference?

A)$17,500
B)$75,000
C)$92,500
D)$120,000

Question 67

Fleming Company has the following cumulative taxable temporary differences:

The tax rate enacted for 2011 is 40%, while the tax rate enacted for future years is 30%.Taxable income for 2011 is $1,600,000 and there are no permanent differences.Fleming's pretax financial income for 2011 is:

A)$960,000
B)$1,340,000
C)$1,730,000
D)$2,240,000

Question 68

Use the following information for questions.
Rowen, Inc.had pre-tax accounting income of $900,000 and a tax rate of 40% in 2010, its first year of operations.During 2010 the company had the following transactions:

For 2010, what is the amount of income taxes payable for Rowen, Inc?

A)$301,600
B)$327,200
C)$343,200
D)$386,400

Question 69

Use the following information for questions.
Hopkins Co.at the end of 2010, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

The estimated litigation expense of $1,000,000 will be deductible in 2011 when it is expected to be paid.Use of the depreciable assets will result in taxable amounts of $500,000 in each of the next three years.The income tax rate is 30% for all years.
Watson Corporation prepared the following reconciliation for its first year of operations:

The temporary difference will reverse evenly over the next two years at an enacted tax rate of 40%.The enacted tax rate for 2011 is 28%.What amount should be reported in its 2011 income statement as the current portion of its provision for income taxes?

A)$224,000
B)$320,000
C)$336,000
D)$480,000

Question 70

Use the following information for questions.
Lyons Company deducts insurance expense of $84,000 for tax purposes in 2010, but the expense is not yet recognized for accounting purposes.In 2011, 2012, and 2013, no insurance expense will be deducted for tax purposes, but $28,000 of insurance expense will be reported for accounting purposes in each of these years.Lyons Company has a tax rate of 40% and income taxes payable of $72,000 at the end of 2010.There were no deferred taxes at the beginning of 2010.
What is the amount of income tax expense for 2010?

A)$105,600
B)$100,800
C)$84,000
D)$72,000

Question 71

Larsen Corporation reported $100,000 in revenues in its 2010 financial statements, of which $44,000 will not be included in the tax return until 2011.The enacted tax rate is 40% for 2010 and 35% for 2011.What amount should Larsen report for deferred tax liability in its statement of financial position at December 31, 2010?

A)$15,400
B)$17,600
C)$19,600
D)$22,400

Question 72

Use the following information for questions.
Hopkins Co.at the end of 2010, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows:

The estimated litigation expense of $1,000,000 will be deductible in 2011 when it is expected to be paid.Use of the depreciable assets will result in taxable amounts of $500,000 in each of the next three years.The income tax rate is 30% for all years.
Link Sink Manufacturing has a deferred tax asset account with a balance of $300,000 at the end of 2012 due to a single cumulative temporary difference of $750,000.At the end of 2013, this same temporary difference has increased to a cumulative amount of $1,000,000.Taxable income for 2013 is $1,700,000.The tax rate is 40% for 2013, but enacted tax rates for all future years are 35%.Assuming it's probable that 70% of the deferred tax asset will be realized, what amount will be reported on Link Sink's statement of financial position for the deferred tax asset at December 31, 2013?

A)$262,500.
B)$280,000.
C)$245,000.
D)$595,000.

Question 73

Use the following information for questions.
Kraft Company made the following journal entry in late 2010 for rent on property it leases to Danford Corporation.

The payment represents rent for the years 2011 and 2012, the period covered by the lease.Kraft Company is a cash basis taxpayer.Kraft has income tax payable of $92,000 at the end of 2010, and its tax rate is 35%.
Assuming the taxes payable at the end of 2011 is $102,000, what amount of income tax expense would Kraft Company record for 2011?

A)$81,000
B)$91,500
C)$112,500
D)$123,000

Question 74

Use the following information for questions.
At the beginning of 2010; Elephant, Inc.had a deferred tax asset of $4,000 and a deferred tax liability of $6,000.Pre-tax accounting income for 2010 was $300,000 and the enacted tax rate is 40%.The following items are included in Elephant's pre-tax income:

What is Elephant, Inc.'s taxable income for 2010?

A)$300,000
B)$252,000
C)$348,000
D)$452,000

Question 75

Use the following information for questions.
At the beginning of 2010; Elephant, Inc.had a deferred tax asset of $4,000 and a deferred tax liability of $6,000.Pre-tax accounting income for 2010 was $300,000 and the enacted tax rate is 40%.The following items are included in Elephant's pre-tax income:

Which of the following is required to adjust Elephant, Inc.'s deferred tax asset to its correct balance at December 31, 2010?

A)A debit of $20,800
B)A credit of $15,200
C)A debit of $15,200
D)A debit of $16,800

Question 76

Use the following information for questions.
At the beginning of 2010; Elephant, Inc.had a deferred tax asset of $4,000 and a deferred tax liability of $6,000.Pre-tax accounting income for 2010 was $300,000 and the enacted tax rate is 40%.The following items are included in Elephant's pre-tax income:

The ending balance in Elephant, Inc's deferred tax liability at December 31, 2010 is

A)$9,200
B)$15,200
C)$10,400
D)$31,200

Question 77

Use the following information for questions.
Kraft Company made the following journal entry in late 2010 for rent on property it leases to Danford Corporation.

The payment represents rent for the years 2011 and 2012, the period covered by the lease.Kraft Company is a cash basis taxpayer.Kraft has income tax payable of $92,000 at the end of 2010, and its tax rate is 35%.
What amount of income tax expense should Kraft Company report at the end of 2010?

A)$53,000
B)$71,000
C)$81,500
D)$113,000

Question 78

Use the following information for questions.
Lyons Company deducts insurance expense of $84,000 for tax purposes in 2010, but the expense is not yet recognized for accounting purposes.In 2011, 2012, and 2013, no insurance expense will be deducted for tax purposes, but $28,000 of insurance expense will be reported for accounting purposes in each of these years.Lyons Company has a tax rate of 40% and income taxes payable of $72,000 at the end of 2010.There were no deferred taxes at the beginning of 2010.
Assuming that income tax payable for 2011 is $96,000, the income tax expense for 2011 would be what amount?

A)$129,600
B)$107,200
C)$96,000
D)$84,800

Question 79

Use the following information for questions.
Mitchell Corporation prepared the following reconciliation for its first year of operations:

The temporary difference will reverse evenly over the next two years at an enacted tax rate of 40%.The enacted tax rate for 2011 is 35%.
What amount should be reported in its 2011 income statement as the deferred portion of income tax expense?

A)$90,000 debit
B)$120,000 debit
C)$90,000 credit
D)$105,000 credit

Question 80

Use the following information for questions.
Kraft Company made the following journal entry in late 2010 for rent on property it leases to Danford Corporation.

The payment represents rent for the years 2011 and 2012, the period covered by the lease.Kraft Company is a cash basis taxpayer.Kraft has income tax payable of $92,000 at the end of 2010, and its tax rate is 35%.
The following information is available for Kessler Company after its first year of operations:

Kessler estimates its annual warranty expense as a percentage of sales.The amount charged to warranty expense on its books was $95,000.Assuming a 40% income tax rate, what amount was actually paid this year for warranty claims?

A)$105,000
B)$100,000
C)$95,000
D)$85,000