Deck 14: Taxes on the Financial Statements

Question 1

Only domestic entities are included in a combined financial statement prepared under GAAP.

Answer 1

False

Question 2

The current tax expense component of the financial statement total income tax expense generally represents the taxes actually payable (or refunds receivable)from domestic or foreign governmental authorities.

Answer 2

True

Question 3

Under GAAP,a corporation must report the future U.S.tax expense (or benefit)related to the earnings of foreign subsidiaries without regard to repatriation plans for these earnings.

Answer 3

False

Question 4

The benefits of ASC 740-30 (APB 23)are "all or nothing" because if elected,APB 23 applies to the earnings from all foreign subsidiaries.

Question 5

The ownership percentage share of net earnings from a lower-tier corporation owned between 20% and 50% is included in the upper-tier corporation's book income without regard to whether any dividends are paid.

Question 6

If a valuation allowance is increased in the current year,the corporation's effective tax rate will be higher than if the valuation allowance had not increased.

Question 7

If a corporation has no subsidiaries,its book and taxable income are identical.

Question 8

The valuation allowance can reduce a deferred tax liability.

Question 9

A deferred tax asset is the current tax benefit (savings)associated with income or expense to be reported in future year financial statements.

Question 10

A deferred tax liability represents a current tax liability associated with income or expense to be reported in future year financial statements.

Question 11

If a valuation allowance is decreased (released)in the current year,the corporation's effective tax rate will be higher than if the valuation allowance had not increased.

Question 12

Any 80% or more owned domestic subsidiaries must be included in the parent corporation's consolidated tax return.

Question 13

Permanent differences include items that appear in the Federal tax return as income or expense and the financial statements as income or expense,but in different periods.

Question 14

Green,Inc. ,is a domestic corporation with no subsidiaries.It operates in almost every state.Assuming no permanent or temporary differences exist in the current year,Green's tax expense on its financial statements and tax liability reported on its Federal income tax return are identical.

Question 15

A deferred tax asset is the expected future tax benefit (savings)associated with income reported in the current year financial statements.

Question 16

Schedule M-3 of the tax return Form 1120 reconciles financial statement net income after tax with taxable income reported on the Federal tax return.

Question 17

A deferred tax liability represents a potential future tax benefit associated with income reported in the current year financial statements.

Question 18

The purpose of ASC 740 (SFAS 109)is to report the actual taxes paid to State,local,Federal,and foreign governments for the current year.

Question 19

Domestic and foreign entities owned more than 80% are included in a consolidated group's U.S.tax return.

Question 20

Temporary differences are book-tax income differences that eventually appear in either the financial statements or the income tax return,but not both.

Question 21

Current tax expense is always the amount a taxpayer actually paid all Federal,state,and foreign tax authorities in a particular year.

Question 22

Temporary differences cause differences in the hypothetical tax on book income as if taxed at the U.S.Federal tax rate and the actual book income tax expense in the rate reconciliation.

Question 23

The purpose of ASC 740 (SFAS 109)is to build a cushion into currently reported income tax expense in order to insure that the financial statements are conservative.

Question 24

The income tax note to the financial statements includes a reconciliation of a corporation's hypothetical tax on book income as if taxed at the U.S.Federal tax rate and its book tax expense.

Question 25

Paint,Inc. ,a domestic corporation,owns 80% of Blue,Ltd. ,a foreign corporation and Yellow,Inc. ,a domestic corporation.Paint also owns 50% of Green,Inc. ,a domestic corporation.Paint receives no distributions from any of these corporations.Which of these entities' net income are included in Paint's Federal tax return for the current year assuming Paint elects to include all eligible entities in its consolidated tax return?

A)Paint,Blue,Yellow,and Green.
B)Paint,Blue,and Yellow.
C)Paint,Blue,and Green.
D)Paint and Yellow.
E)None of the above.

Question 26

Repatriating prior year earnings from a foreign subsidiary located in a low-tax country where ASC 740-30 (APB 23)benefits were previously adopted will cause an increase in a corporation's current year effective tax rate.

Question 27

Nocera,Inc. ,earns book net income before tax of $600,000 in 2010.Nocera acquires a depreciable asset in 2010 and first year tax depreciation exceeds book depreciation by $120,000.Nocera has no other temporary or permanent differences.Assuming the U.S.tax rate is 35%,what is Nocera's total income tax expense reported on its financial statements for 2010?

A)$252,000.
B)$210,000.
C)$168,000.
D)$42,000.
E)None of the above.

Question 28

Which of the following represent temporary book-tax differences?

A)Compensation-related expenses.
B)Municipal bond interest.
C)Meals and entertainment expense deduction.
D)Nondeductible penalties.
E)All the above.

Question 29

Nocera,Inc. ,earns book net income before tax of $600,000 in 2010.Nocera acquires a depreciable asset in 2010 and first year tax depreciation exceeds book depreciation by $120,000.Nocera has no other temporary or permanent differences.Assuming the U.S.tax rate is 35%,what is Nocera's current income tax expense reported on its financial statements for 2010?

A)$252,000.
B)$210,000.
C)$168,000.
D)$42,000.
E)None of the above.

Question 30

Music,Inc. ,a domestic corporation,owns 90% of Vinyl,Ltd. ,a foreign corporation and Digital,Inc. ,a domestic corporation.Music also owns 60% of Record,Inc. ,a domestic corporation.Music receives no distributions from any of these corporations.Which of these entities' net income are included in Music's Federal tax return for the current year assuming Music elects to include all eligible entities in its consolidated tax return?

A)Music,Vinyl,Digital,and Record.
B)Music,Vinyl,and Digital.
C)Music,Vinyl,and Record.
D)Music and Digital.
E)None of the above.

Question 31

Which of the following taxes are included in the total income tax expense of a corporation as reported on its financial statements?

A)State income taxes.
B)Federal income taxes.
C)Foreign income taxes.
D)Local income taxes.
E)All the above.

Question 32

ASC 740 (FIN 48)allows companies to choose their own level of certainty in reporting uncertain tax positions in their financial statements.

Question 33

Music,Inc. ,a domestic corporation,owns 100% of Vinyl,Ltd. ,a foreign corporation and Digital,Inc. ,a domestic corporation.Music also owns 12% of Record,Inc. ,a domestic corporation.Music receives no distributions from any of these corporations.Which of these entities' net income are included in Music's income statement for current year financial reporting purposes?

A)Music,Vinyl,Digital,and Record.
B)Music,Vinyl,and Digital.
C)Music,Vinyl,and Record.
D)Music,Digital,and Record.
E)None of the above.

Question 34

Nocera,Inc. ,earns book net income before tax of $600,000 in 2010.Nocera acquires a depreciable asset in 2010 and first year tax depreciation exceeds book depreciation by $120,000.Nocera has no other temporary or permanent differences.Assuming the U.S.tax rate is 35%,and that this is Nocera's first year of operations,what is Nocera's balance in its deferred tax asset and deferred tax liability accounts at year end?

A)$0 and $42,000.
B)$42,000 and $0.
C)$42,000 and $42,000.
D)$0 and $0.
E)None of the above.

Question 35

A $50,000 cash tax savings that is temporary has the same effect on a corporation's current year effective tax rate as a $50,000 cash tax savings that is a permanent difference.

Question 36

Which of the following taxes are included in the total income tax expense of a corporation reported on its Federal tax return?

A)State income taxes.
B)Federal income taxes.
C)Foreign income taxes.
D)Local income taxes.
E)All the above.

Question 37

Ocean,Inc. ,a domestic corporation,owns 100% of Atlantic,a German corporation,and 100% of Pacific,a Singapore corporation.If Ocean wants to claim the "permanent reinvestment" benefits provided by APB 23,it can use ASC 740-30 (APB 23)for either,or both,Atlantic and Pacific.

Question 38

Paint,Inc. ,a domestic corporation,owns 100% of Blue,Ltd. ,a foreign corporation and Yellow,Inc. ,a domestic corporation.Paint also owns 40% of Green,Inc. ,a domestic corporation.Paint receives no distributions from any of these corporations.Which of these entities' net income are included in Paint's income statement for current year financial reporting purposes?

A)Paint,Blue,Yellow,and Green.
B)Paint,Blue,and Yellow.
C)Paint,Blue,and Green.
D)Paint,Yellow,and Green.
E)None of the above.

Question 39

ASC 740 (FIN 48)replaced FAS 5,Accounting for Contingencies,with regard to accounting for uncertain tax positions.

Question 40

Nocera,Inc. ,earns book net income before tax of $600,000 in 2010.Nocera acquires a depreciable asset in 2010 and first year tax depreciation exceeds book depreciation by $120,000.Nocera has no other temporary or permanent differences.Assuming the U.S.tax rate is 35%,what is Nocera's deferred income tax liability reported on its financial statements for 2010?

A)$252,000.
B)$210,000.
C)$168,000.
D)$42,000.
E)None of the above.

Question 41

North,Inc. ,earns book net income before tax of $500,000 in 2010.In computing its book income,North deducts $50,000 more in warranty expense for book purposes than allowed for tax purposes.North has no other temporary or permanent differences.Assuming the U.S.tax rate is 35% and no valuation allowance is required,what is North's current income tax expense reported on its financial statements for 2010?

A)$175,000.
B)$192,500.
C)$157,500.
D)$17,500.
E)None of the above.

Question 42

Cold,Inc. ,reported a $100,000 total tax expense for financial statement purposes in 2009.This total expense consisted of $150,000 in current tax expense and a deferred tax benefit of $50,000.The deferred tax benefit consisted of $90,000 in deferred tax assets reduced by a valuation allowance of $40,000.In 2010,Cold reports $600,000 in book net income before tax.Cold has no permanent or temporary book-tax differences for 2010.At the end of 2010,Cold's auditors determine that the existing valuation allowance of $40,000 should be reduced to zero.What is Cold's total tax expense for 2010?

A)$210,000.
B)$170,000.
C)$250,000.
D)$40,000.
E)None of the above.

Question 43

West,Inc. ,is a domestic corporation.It owns 100% of Texas,Inc. ,a domestic corporation,100% of Paris,a foreign corporation,and 35% of Iowa,Inc. ,a domestic corporation.Which entities income will be included in West's Federal consolidated income tax return? How would your answer change if West instead owned 15% of Iowa?

Question 44

Which of the following statements describes considerations that may be made by users of financial statements regarding a company's tax expense.

A)The breakdown of tax expense between current and deferred may provide useful information regarding the comparison of tax burdens between companies.
B)An analysis of earnings before interest,taxes,depreciation,and amortization (EBITDA)is often a better approach to comparing operating results of two companies.
C)One-time effects within a company's effective tax rate should be removed before comparing effective tax rates across companies (or across years for the same company).
D)All the above.

Question 45

Which of the following items are not included in the financial statement income tax note effective tax rate reconciliation?

A)Hypothetical tax on book income at U.S.Federal corporate tax rate.
B)Tax effect of permanent differences.
C)Tax effect of temporary differences.
D)Total tax expense per financial statements.
E)None of the above.

Question 46

North,Inc. ,earns book net income before tax of $500,000 in 2010.In computing its book income,North deducts $50,000 more in warranty expense for book purposes than allowed for tax purposes.North has no other temporary or permanent differences.Assuming the U.S.tax rate is 35% and no valuation allowance is required,what is North's deferred income tax asset reported on its financial statements for 2010?

A)$175,000.
B)$192,500.
C)$157,500.
D)$17,500.
E)None of the above.

Question 47

South,Inc. ,earns book net income before tax of $400,000 in 2009.South acquires a depreciable asset in 2009 and first year tax depreciation exceeds book depreciation by $50,000.At the end of 2009,South's deferred tax liability account balance is $17,500.In 2010,South earns $500,000 book net income before tax and its book depreciation exceeds tax depreciation by $20,000.South has no other temporary or permanent differences.Assuming the U.S.tax rate is 35%,what is South's total income tax expense reported on its financial statements for 2010?

A)$182,000.
B)$175,000.
C)$168,000.
D)$7,000.
E)None of the above.

Question 48

Beach,Inc. ,a domestic corporation,owns 100% of Mountain,Ltd. ,a manufacturing facility in Ireland.Mountain has no operations or activities in the United States.The U.S.tax rate is 35% and the Irish tax rate is 10%.For the current year,Beach earns $500,000 in taxable income.Mountain earns $300,000 in taxable income from its operations,pays $30,000 in taxes to Ireland,and makes no distributions to Beach.What is Beach's effective tax rate for book purposes assuming Beach does not make the permanent reinvestment assumption of ASC 740-30 (APB 23)?

A)38.75%.
B)31.25%.
C)35%.
D)25.63%.
E)None of the above.

Question 49

Which of the following items are not included in the income tax note for a publicly traded company?

A)Breakdown of income between foreign and domestic.
B)Analysis of deferred tax assets and liabilities.
C)Breakdown of income among States.
D)Rate reconciliation.
E)Analysis of total tax expense components.

Question 50

Hot,Inc.'s primary competitor is Cold,Inc.When comparing relative deferred tax asset and liability accounts with Cold,which of the following should Hot do?

A)Scale the deferred tax assets and liabilities by total sales or total assets.
B)Compare raw dollar amounts of deferred tax assets and liabilities.
C)Ignore deferred tax assets and liabilities and focus on overall effective tax rate.
D)Ignore all tax information other than the current tax expense.
E)None of the above.

Question 51

South,Inc. ,earns book net income before tax of $400,000 in 2009.South acquires a depreciable asset in 2009 and first year tax depreciation exceeds book depreciation by $50,000.At the end of 2009,South's deferred tax liability account balance is $17,500.In 2010,South earns $500,000 book net income before tax and its book depreciation exceeds tax depreciation by $20,000.South has no other temporary or permanent differences.Assuming the U.S.tax rate is 35%,what is South's balance in its deferred tax liability account at the end of 2010?

A)$7,000.
B)$10,500.
C)$17,500.
D)$0.
E)None of the above.

Question 52

How are deferred tax liabilities and assets categorized on the balance sheet?

A)Capital and ordinary.
B)Domestic and foreign.
C)Current and non-current.
D)Positive and negative.
E)None of the above.

Question 53

Rogene,Inc. ,reported the following results for the current year.

Determine Rogene's taxable income for the current year.Identify any temporary or permanent book-tax differences.

Question 54

PaintCo Inc. ,a domestic corporation,owns 100% of BrushCo Ltd. ,an Irish corporation.Assume that the U.S.corporate tax rate is 35% and the Irish rate is 10%.PaintCo is permanently reinvesting BrushCo's earnings outside the United States under ASC 740-30 (APB 23).The corporations' book income,permanent and temporary differences,and current tax expense are as follows.Determine PaintCo's total tax expense reported on its financial statements,its current tax expense (benefit),and its deferred tax expense (benefit).

Question 55

North,Inc. ,earns book net income before tax of $500,000 in 2010.In computing its book income,North deducts $50,000 more in warranty expense for book purposes than allowed for tax purposes.North has no other temporary or permanent differences.Assuming the U.S.tax rate is 35% and no valuation allowance is required,what is North's total income tax expense reported on its financial statements for 2010?

A)$175,000.
B)$192,500.
C)$157,500.
D)$17,500.
E)None of the above.

Question 56

Collins,Inc.reports an effective tax rate in its income tax footnote of 14%.The only reconciling item between the hypothetical tax at 35% is a valuation allowance reversal of negative 21%.Which of the following statements is true concerning comparing Collins,Inc.'s effective tax rate with its competitors,all of whom have an effective tax rate between 32 and 36%?

A)Collins Inc.is managing its tax burden in a more efficient manner than its competitors.
B)Collins Inc.earned more cash profits because of its lower effective tax rate.
C)Collins Inc.'s structural effective tax rate is actually quite close to its competitors.
D)Collins Inc.is likely to be engaged in tax shelter activities.

Question 57

West,Inc. ,is a domestic corporation.It owns 100% of Texas,Inc. ,a domestic corporation,100% of Paris,a foreign corporation,and 35% of Iowa,Inc. ,a domestic corporation.Which entities income will be included in West's combined financial statement? How would your answer change if West instead owned 15% of Iowa?

Question 58

South,Inc. ,earns book net income before tax of $400,000 in 2009.South acquires a depreciable asset in 2009 and first year tax depreciation exceeds book depreciation by $50,000.At the end of 2009,South's deferred tax liability account balance is $17,500.In 2010,South earns $500,000 book net income before tax and its book depreciation exceeds tax depreciation by $20,000.South has no other temporary or permanent differences.Assuming the U.S.tax rate is 35%,what is South's current income tax expense reported on its financial statements for 2010?

A)$182,000.
B)$175,000.
C)$168,000.
D)$7,000.
E)None of the above.

Question 59

Larson,Inc. ,hopes to report a total book tax expense of $160,000 in the current year.This $160,000 expense consists of $240,000 in current tax expense and an $80,000 tax benefit related to the expected future use of an NOL by Larson.If the auditors determine that a valuation allowance of $30,000 must be placed against Larson's deferred tax assets,what is Larson's total book tax expense?

A)$160,000.
B)$130,000.
C)$190,000.
D)$240,000.
E)None of the above.

Question 60

Beach,Inc. ,a domestic corporation,owns 100% of Mountain,Ltd. ,a manufacturing facility in Ireland.Mountain has no operations or activities in the United States.The U.S.tax rate is 35% and the Irish tax rate is 10%.For the current year,Beach earns $500,000 in taxable income.Mountain earns $300,000 in taxable income from its operations,pays $30,000 in taxes to Ireland,and makes no distributions to Beach.What is Beach's effective tax rate for book purposes assuming Beach makes the permanent reinvestment assumption of ASC 740-30 (APB 23)?

A)38.75%.
B)31.25%.
C)35%.
D)25.63%.
E)None of the above.

Question 61

Gator,Inc. ,is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 34% corporate tax rate and no valuation allowance.



Gator Inc.'s gross deferred tax assets and liabilities at the beginning of Gator's year are listed below.


Gator Inc.'s book income before tax is $6,300.Gator has two permanent differences between book and taxable income.It earned $250 in tax exempt municipal bond interest and had $460 in nondeductible meals and entertainment expense.Determine the net deferred tax asset or net deferred tax liability at year end.

Question 62

Amelia,Inc. ,is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 34% corporate tax rate and no valuation allowance.



Amelia Inc.'s gross deferred tax assets and liabilities at the beginning of Amelia's year are listed below.


Amelia Inc.'s book income before tax is $25,200.Amelia has two permanent differences between book and taxable income.It earned $1,000 in tax exempt municipal bond interest and had $1,840 in nondeductible meals and entertainment expense.Provide the income tax footnote rate reconciliation for Amelia.

Question 63

Gator,Inc. ,is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 34% corporate tax rate and no valuation allowance.



Gator Inc.'s gross deferred tax assets and liabilities at the beginning of Gator's year are listed below.


Gator Inc.'s book income before tax is $6,300.Gator has two permanent differences between book and taxable income.It earned $250 in tax exempt municipal bond interest and had $460 in nondeductible meals and entertainment expense.Determine the change in Gator's deferred tax assets for the current year.

Question 64

Amelia,Inc. ,is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 34% corporate tax rate and no valuation allowance.



Amelia Inc.'s gross deferred tax assets and liabilities at the beginning of Amelia's year are listed below.


Amelia Inc.'s book income before tax is $25,200.Amelia has two permanent differences between book and taxable income.It earned $1,000 in tax exempt municipal bond interest and had $1,840 in nondeductible meals and entertainment expense.Determine Amelia's change in net deferred tax asset or net deferred tax liability for the current year and provide the journal entry to record this amount.

Question 65

Describe the factors considered in evaluating the need for a valuation allowance.

Question 66

Compare and contrast the objectives of the Federal tax return and the GAAP financial statements.

Question 67

Amelia,Inc. ,is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 34% corporate tax rate and no valuation allowance.



Amelia Inc.'s gross deferred tax assets and liabilities at the beginning of Amelia's year are listed below.


Amelia Inc.'s book income before tax is $25,200.Amelia has two permanent differences between book and taxable income.It earned $1,000 in tax exempt municipal bond interest and had $1,840 in nondeductible meals and entertainment expense.Determine the net deferred tax asset or net deferred tax liability at year end.

Question 68

Amelia,Inc. ,is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 34% corporate tax rate and no valuation allowance.



Amelia Inc.'s gross deferred tax assets and liabilities at the beginning of Amelia's year are listed below.


Amelia Inc.'s book income before tax is $25,200.Amelia has two permanent differences between book and taxable income.It earned $1,000 in tax exempt municipal bond interest and had $1,840 in nondeductible meals and entertainment expense.Determine the change in Amelia's deferred tax liabilities for the current year.

Question 69

PaintCo Inc. ,a domestic corporation,owns 100% of BrushCo Ltd. ,an Irish corporation.Assume that the U.S.corporate tax rate is 35% and the Irish rate is 10%.PaintCo is permanently reinvesting BrushCo's earnings outside the United States under ASC 740-30 (APB 23).The corporations' book income,permanent and temporary differences,and current tax expense are as follows.Provide the income tax footnote rate reconciliation for PaintCo using both dollar amounts and percentages.

Question 70

Gator,Inc. ,is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 34% corporate tax rate and no valuation allowance.



Gator Inc.'s gross deferred tax assets and liabilities at the beginning of Gator's year are listed below.


Gator Inc.'s book income before tax is $6,300.Gator has two permanent differences between book and taxable income.It earned $250 in tax exempt municipal bond interest and had $460 in nondeductible meals and entertainment expense.Determine the change in Gator's deferred tax liabilities for the current year.

Question 71

Gator,Inc. ,is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 34% corporate tax rate and no valuation allowance.



Gator Inc.'s gross deferred tax assets and liabilities at the beginning of Gator's year are listed below.


Gator Inc.'s book income before tax is $6,300.Gator has two permanent differences between book and taxable income.It earned $250 in tax exempt municipal bond interest and had $460 in nondeductible meals and entertainment expense.What is Gator's total provision for income tax expense reported on its financial statement and its book net income after tax.

Question 72

Amelia,Inc. ,is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 34% corporate tax rate and no valuation allowance.



Amelia Inc.'s gross deferred tax assets and liabilities at the beginning of Amelia's year are listed below.


Amelia Inc.'s book income before tax is $25,200.Amelia has two permanent differences between book and taxable income.It earned $1,000 in tax exempt municipal bond interest and had $1,840 in nondeductible meals and entertainment expense.Determine the change in Amelia's deferred tax assets for the current year.

Question 73

A multinational corporation has used ASC 740-30 (APB 23)to avoid reporting any U.S.deferred tax expense on $50 million of the earnings of its foreign subsidiaries.All of these subsidiaries operate in countries with lower tax rates than the United States.Describe how any actual profit repatriation from these subsidiaries will affect the corporation's book effective tax rate.

Question 74

Discuss how temporary and permanent differences affect the gap between book and taxable income.

Question 75

Gator,Inc. ,is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 34% corporate tax rate and no valuation allowance.



Gator Inc.'s gross deferred tax assets and liabilities at the beginning of Gator's year are listed below.


Gator Inc.'s book income before tax is $6,300.Gator has two permanent differences between book and taxable income.It earned $250 in tax exempt municipal bond interest and had $460 in nondeductible meals and entertainment expense.Provide the income tax footnote rate reconciliation for Gator.

Question 76

Amelia,Inc. ,is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 34% corporate tax rate and no valuation allowance.



Amelia Inc.'s gross deferred tax assets and liabilities at the beginning of Amelia's year are listed below.


Amelia Inc.'s book income before tax is $25,200.Amelia has two permanent differences between book and taxable income.It earned $1,000 in tax exempt municipal bond interest and had $1,840 in nondeductible meals and entertainment expense.What is Amelia's total provision for income tax expense reported on its financial statement and its book net income after tax.

Question 77

Gator,Inc. ,is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 34% corporate tax rate and no valuation allowance.



Gator Inc.'s gross deferred tax assets and liabilities at the beginning of Gator's year are listed below.


Gator Inc.'s book income before tax is $6,300.Gator has two permanent differences between book and taxable income.It earned $250 in tax exempt municipal bond interest and had $460 in nondeductible meals and entertainment expense.Calculate Gator's current tax expense.

Question 78

Amelia,Inc. ,is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 34% corporate tax rate and no valuation allowance.



Amelia Inc.'s gross deferred tax assets and liabilities at the beginning of Amelia's year are listed below.


Amelia Inc.'s book income before tax is $25,200.Amelia has two permanent differences between book and taxable income.It earned $1,000 in tax exempt municipal bond interest and had $1,840 in nondeductible meals and entertainment expense.Calculate Amelia's current tax expense.

Question 79

Gator,Inc. ,is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 34% corporate tax rate and no valuation allowance.



Gator Inc.'s gross deferred tax assets and liabilities at the beginning of Gator's year are listed below.


Gator Inc.'s book income before tax is $6,300.Gator has two permanent differences between book and taxable income.It earned $250 in tax exempt municipal bond interest and had $460 in nondeductible meals and entertainment expense.Provide the journal entry to record Gator's current tax expense.

Question 80

Gator,Inc. ,is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 34% corporate tax rate and no valuation allowance.



Gator Inc.'s gross deferred tax assets and liabilities at the beginning of Gator's year are listed below.


Gator Inc.'s book income before tax is $6,300.Gator has two permanent differences between book and taxable income.It earned $250 in tax exempt municipal bond interest and had $460 in nondeductible meals and entertainment expense.Determine Gator's change in net deferred tax asset or net deferred tax liability for the current year and provide the journal entry to record this amount.