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Chapter 17 Accounting for Income Taxes

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Question;Chapter 17;Accounting for Income Taxes;True / False Questions;1. ASC 740;governs how a company accounts for all taxes it incurs.;True False;2. ASC 740;is the sole source of rules related to accounting for income taxes.;True False;3. Temporary;differences create either a deferred tax asset or a deferred tax liability.;True False;4. Publicly-traded;companies usually file their financial statements before they file their;federal income tax returns.;True False;5. The;Emerging Issues Task Force assists the FASB by providing guidance on the;implementation of ASC 740 and other accounting pronouncements.;True False;6. ASC 740;applies to accounting for state and local and international income taxes as;well as federal income taxes.;True False;7. The;current income tax expense or benefit" always represents the taxes;paid or refunded in the current year.;True False;8. The focus;of ASC 740 is the income statement.;True False;9. Tax-exempt;interest from municipal bonds is an example of a permanent difference.;True False;10. The tax;effects of permanent differences always show up in a company's computation of;its effective tax rate.;True False;11. In;general, a temporary difference reflects a difference in the financial basis;and tax basis of an asset or liability on the balance sheet.;True False;12. Temporary;differences that are cumulatively "favorable" are defined as taxable;temporary differences.;True False;13. Brown;Corporation reports $100,000 of gain from the sale of land on its income;statement. For tax purposes, Brown uses the installment method and reports gain;of $10,000. The $90,000 difference in the gain reported is a deductible;temporary difference.;True False;14. ASC 740;deals with accounting for uncertain tax positions.;True False;15. Congress;reduces the corporate tax rate from 35 percent to 25 percent effective in 2015.;The tax rate change will affect only deferred tax assets and liabilities that;arise in 2015 and thereafter.;True False;16. A;valuation allowance can reduce both a deferred tax asset and a deferred tax;liability.;True False;17. A;corporation evaluates the need for a valuation allowance by comparing both;positive and negative evidence that the corporation will realize a deferred tax;asset in the future.;True False;18. A;corporation undertakes a valuation allowance analysis to determine if a;deferred tax asset should be recognized on the balance sheet.;True False;19. A;cumulative financial accounting (book) loss over three years likely would be;considered significant negative evidence in a valuation allowance analysis.;True False;20. ASC 740;applies a two-step process in determining if an uncertain tax benefit should be;recognized.;True False;21. Potential;interest and penalties that would be assessed on a disallowed unrecognized tax;benefit must be recorded in a company's income tax expense under ASC 740.;True False;22. Once;determined, an unrecognized tax benefit under ASC 740 is not readjusted for;subsequent events.;True False;23. ASC 740;permits a corporation to net its current and long-term deferred tax;liabilities.;True False;24. The;classification of a deferred tax asset as current or long-term usually depends;on the balance sheet classification of the asset or liability to which it;relates.;True False;25. A;corporation's effective tax rate as computed in its income tax note is the;company's cash tax rate for the year.;True False;Multiple Choice Questions;26. Which of;the following taxes would not be accounted for under ASC 740?;A. Income;taxes paid to the German government.;B. Income;taxes paid to the U.S. government.;C. Value-added;taxes paid to the Swiss government.;D. Income;taxes paid to the City of New York.;27. Which of;the following organizations does not issue rules that apply to accounting for;income taxes?;A. FASB;B. SEC;C. EITF;D. IRS;28. Which of;the following statements best describes the objective(s) of ASC 740?;A. To;compute a corporation's current income tax liability or benefit.;B. To;recognize deferred tax liabilities and assets.;C. To report;permanent differences in the balance sheet.;D. To;compute a corporation's current income tax liability or benefit and to;recognize deferred tax liabilities and assets.;29. Which of;the following items does not result in a permanent difference?;A. Accelerated;tax depreciation in excess of straight-line book depreciation;B. Interest;income from a tax-exempt municipal bond;C. Dividend;received deduction on the income tax return;D. Domestic;manufacturing deduction on the income tax return;30. Which of;the following temporary differences creates a deferred tax asset in the year in;which it originates?;A. Accelerated;tax depreciation in excess of straight-line book depreciation;B. Prepayment;income reported on the tax return prior to being reported on the income;statement;C. Gain;reported on the income statement prior to being reported on the tax return;D. Prepayment;deduction reported on the tax return prior to being reported on the income;statement;31. Which of;the following statements is true?;A. Another;name for a taxable temporary difference is an unfavorable difference;B. Another;name for a taxable temporary difference is a favorable difference;C. Another;name for a deductible temporary difference is a favorable difference;D. Another;name for a deductible temporary difference is a permanent difference;32. Which of;the following best describes the focus of ASC 740?;A. ASC 740;takes an "asset and liability approach" that focuses on the balance;sheet;B. ASC 740;takes an "income and expense approach" that focuses on the income;statement;C. ASC 740;takes a "taxes paid or refunded approach" that focuses on the;statement of cash flows;D. ASC 740;takes a "permanent differences approach" that focuses on the;effective tax rate reported in the income tax note to the financial statements;33. Grand;River Corporation reported pretax book income of $500,000. Included in the;computation were favorable temporary differences of $100,000, unfavorable;temporary differences of $10,000, and favorable permanent differences of;$90,000. Assuming a tax rate of 34%, the Corporation's current income tax;expense or benefit would be;A. $170,000;B. $163,200;C. $108,800;D. $102,000;34. Packard;Corporation reported pretax book income of $500,000. Included in the;computation were favorable temporary differences of $10,000, unfavorable;temporary differences of $100,000, and unfavorable permanent differences of;$90,000. Assuming a tax rate of 34%, the Corporation's current income tax;expense or benefit would be;A. $231,200;B. $176,800;C. $170,000;D. $108,800;35. Abbot;Corporation reported pretax book income of $500,000. During the current year;the reserve for bad debts increased by $5,000. In addition, tax depreciation;exceeded book depreciation by $40,000. Finally, Abbot received $3,000 of;tax-exempt life insurance proceeds from the death of one of its officers. Using;a tax rate of 34%, Abbot's current income tax expense or benefit would be;A. $186,320;B. $170,000;C. $157,080;D. $153,680;36. Costello;Corporation reported pretax book income of $500,000. During the current year;the reserve for bad debts increased by $5,000. In addition, tax depreciation;exceeded book depreciation by $40,000. Finally, Costello received $3,000 of;tax-exempt life insurance proceeds from the death of one of its officers. Using;a tax rate of 34%, Costello's deferred income tax expense or benefit would be;A. $11,900;net deferred tax expense;B. $11,900;net deferred tax benefit;C. $15,300;net deferred tax benefit;D. $15,300;net deferred tax expense;37. Davison;Company determined that the book basis of its net accounts receivable was less;than the tax basis of its net accounts receivable by $800,000 due to a;difference in the allowance for bad debts account. This basis difference is;characterized as;A. Deductible;temporary difference;B. Taxable;temporary difference;C. Favorable;permanent difference;D. Unfavorable;permanent difference;38. Which of;the following items is not a temporary difference?;A. Vacation;pay accrued for tax purposes in a prior period is deducted in the current;period;B. Tax;depreciation for the period exceeds book depreciation;C. A;goodwill impairment expense is recorded on the income statement, the goodwill;did not have a tax basis when it was created;D. Bad debts;charged off in the current period exceed the bad debts accrued in the current;period;39. Smith;Company reported pretax book income of $400,000. Included in the computation;were favorable temporary differences of $50,000, unfavorable temporary;differences of $20,000, and favorable permanent differences of $40,000. Using a;tax rate of 34%, Smith's deferred income tax expense or benefit would be;A. Net;deferred tax expense of $10,200;B. Net;deferred tax benefit of $10,200;C. Net;deferred tax expense of $23,800;D. Net;deferred tax benefit of $23,800;40. Which of;the following book-tax basis differences results in a deductible temporary;difference?;A. Book;basis of an employee post-retirement benefits liability exceeds its tax basis;B. Book;basis of a building exceeds the tax basis of the building;C. Book;basis of an acquired intangible exceeds the tax basis of the intangible;D. Tax basis;of a prepaid liability exceeds the book basis of the liability;41. Which of;the following items is not a permanent book/tax difference?;A. Tax-exempt;life insurance proceeds;B. Non-deductible;meals and entertainment expense;C. Accrued;vacation pay liability not paid within the first 2? months of the next tax year;D. Domestic;production activities deduction;42. Marlin;Corporation reported pretax book income of $1,000,000. During the current year;the net reserve for warranties increased by $25,000. In addition, book;depreciation exceeded tax depreciation by $100,000. Finally, Marlin subtracted;a dividends received deduction of $15,000 in computing its current year taxable;income. Using a tax rate of 34%, Marlin's current income tax expense or benefit;would be;A. $387,600;B. $377,400;C. $340,000;D. $292,400;43. Swordfish;Corporation reported pretax book income of $1,000,000. During the current year;the net reserve for warranties increased by $25,000. In addition, book;depreciation exceeded tax depreciation by $100,000. In prior years, tax;depreciation exceeded book depreciation by a cumulative amount of $500,000.;Finally, Swordfish subtracted a dividends received deduction of $15,000 in;computing its current year taxable income. Using a tax rate of 34%, Swordfish's;deferred income tax expense or benefit would be;A. $25,500;net deferred tax expense;B. $25,500;net deferred tax benefit;C. $42,500;net deferred tax benefit;D. $42,500;net deferred tax expense;44. Kedzie;Company determined that the book basis of its liability for "other;post-retirement benefits" (OPEB) exceeded the tax basis of this account by;$10,000,000. This basis difference is characterized as;A. Deductible;temporary difference;B. Taxable;temporary difference;C. Favorable;permanent difference;D. Unfavorable;permanent difference;45. Which of;the following statements is true?;A. ASC 740;focuses on the income tax expense or benefit on the income statement;B. ASC 740;focuses on the balances in the deferred tax assets and liabilities on the;balance sheet;C. ASC 740;focuses on the income taxes paid or refunded in the Statement of Cash Flows;D. ASC 740;focuses on the computation of a company's effective tax rate in the income tax;note to the financial statements;46. Bruin;Company received a $100,000 insurance payment on the death of its company;president. The company annually paid $1,000 of non-deductible insurance;premiums on the policy. Bruin reported the insurance receipt as income and;deducted the premium payments on its books. For ASC 740 purposes, the income;and deduction are characterized as;A. Both are;taxable temporary differences;B. Both are;deductible temporary differences;C. The;insurance receipt is a favorable permanent difference and the premium payment;is an unfavorable permanent difference;D. The;insurance receipt is a taxable temporary difference and the premium payment is;an unfavorable permanent difference;47. Which of;the following statements is true?;A. A change;in capitalized inventory costs under ?263A always produces an increase in a;deferred tax asset.;B. A change;in capitalized inventory costs under ?263A always produces a decrease in a;deferred tax asset.;C. A change;in capitalized inventory costs under ?263A can produce an increase or a;decrease in a deferred tax asset.;D. A change;in capitalized inventory costs under ?263A always produces a permanent;difference.;48. Robinson;Company had a net deferred tax liability of $34,000 at the beginning of the;year, representing a net taxable temporary difference of $100,000. During the;year, Robinson reported pretax book income of $400,000. Included in the;computation were favorable temporary differences of $50,000 and unfavorable;temporary differences of $20,000. During the year, the company's tax rate;increased from 34% to 35%. Robinson's deferred income tax expense or benefit;for the current year would be;A. Net;deferred tax benefit of $10,500;B. Net;deferred tax expense of $10,500;C. Net;deferred tax benefit of $11,500;D. Net;deferred tax expense of $11,500;49. Which of;the following statements is true?;A. In;determining if a valuation allowance is needed, positive evidence is considered;more persuasive than negative evidence.;B. In;determining if a valuation allowance is needed, negative evidence is considered;more persuasive than positive evidence.;C. In;determining if a valuation allowance is needed, negative and positive evidence;must be evaluated equally.;D. In;determining if a valuation allowance is needed, only negative evidence is;evaluated.;50. Which of;the following statements best describes a valuation allowance as it relates to;accounting for income taxes?;A. A;valuation allowance is a contra account to deferred tax assets only;B. A;valuation allowance is a contra account to deferred tax liabilities only;C. A;valuation allowance is a contra account to deferred tax assets and liabilities;D. A;valuation allowance is a contra account to noncurrent deferred tax assets only;51. A;valuation allowance is recorded against a deferred tax asset when;A. It is;probable that the deferred tax asset will not be realized in the future;B. It is;more likely than not that the deferred tax asset will not be realized in the;future;C. It is;highly likely the deferred tax asset will not be realized in the future;D. It is;remote the deferred tax asset will not be realized in the future;52. Knollcrest;Corporation has a cumulative book loss over the past 36 months. Which of the;following statements best describes how this fact enters into the valuation;allowance analysis?;A. The book;loss is considered sufficient negative evidence that a valuation must be;recorded.;B. The book;loss is considered negative evidence that must be evaluated along with other;evidence as to whether a valuation allowance should be recorded.;C. The book;loss is not considered negative evidence because it relates to book income and;not taxable income.;D. A;cumulative book loss is considered negative evidence only after a period of 60;months.;53. Which of;the following items is not considered evidence in determining if a valuation;allowance is necessary?;A. A;cumulative book loss over some period of time.;B. Management;projects future taxable income based on a backlog of signed contracts.;C. A net;operating loss expired unused in the current year.;D. Management;can implement a tax strategy to create future taxable income, but it will be;detrimental to the future profitability of the company.;54. Which of;the following statements best describes "book equivalent of taxable;income" (BETI)?;A. BETI is;book income adjusted for all permanent and temporary differences;B. BETI is;book income adjusted for all temporary differences;C. BETI is;book income adjusted for all permanent differences;D. BETI is;book income before adjustment for all permanent and temporary differences;55. Jones;Company reported pretax book income of $400,000. Included in the computation;were favorable temporary differences of $50,000, unfavorable temporary differences;of $20,000, and favorable permanent differences of $40,000. Book equivalent of;taxable income is;A. $440,000;B. $400,000;C. $360,000;D. $330,000;56. Tuna;Corporation reported pretax book income of $1,000,000. During the current year;the net reserve for warranties increased by $25,000. In addition, book;depreciation exceeded tax depreciation by $100,000. Finally, Tuna subtracted a;dividends received deduction of $15,000 in computing its current year taxable;income. Book equivalent of taxable income is;A. $1,125,000;B. $1,110,000;C. $1,015,000;D. $985,000;57. Weaver;Company had a net deferred tax liability of $34,000 at the beginning of the;year, representing a net taxable temporary difference of $100,000. During the;year, Weaver reported pretax book income of $400,000. Included in the;computation were favorable temporary differences of $50,000 and unfavorable;temporary differences of $20,000. During the year, the company's tax rate;decreased from 34% to 30%. Weaver's deferred income tax expense or benefit for;the current year would be;A. Net;deferred tax benefit of $9,000;B. Net;deferred tax expense of $9,000;C. Net;deferred tax benefit of $5,000;D. Net;deferred tax expense of $5,000;58. Lynch;Company had a net deferred tax asset of $68,000 at the beginning of the year;representing a net taxable temporary difference of $200,000. During the year;Lynch reported pretax book income of $800,000. Included in the computation were;favorable temporary differences of $20,000 and unfavorable temporary;differences of $50,000. During the year, the company's tax rate decreased from;34% to 30%. Lynch's deferred income tax expense or benefit for the current year;would be;A. Net;deferred tax benefit of $9,000;B. Net;deferred tax expense of $9,000;C. Net;deferred tax benefit of $1,000;D. Net;deferred tax expense of $1,000;59. Which of;the following statements about ASC 740 as it relates to uncertain tax positions;is true?;A. ASC 740;deals with all tax benefits involving income and non-income taxes.;B. ASC 740;deals with whether a recognized income tax benefit will be realized.;C. ASC 740;deals with recognized tax benefits related to income tax positions claimed on a;filed tax return.;D. ASC 740;deals with recognized tax benefits related to income tax positions regardless;of whether the item is taken on a filed tax return.;60. Which of;the following statements best describes the ASC 740 process for evaluating a;company's uncertain tax positions?;A. ASC 740;requires a company to complete a two-step analysis every time it evaluates its;uncertain tax positions.;B. ASC 740;requires a company to complete step 2 (measurement) in its evaluation of its;uncertain tax positions only if it is more-likely-than-not that that its tax;position will be sustained on its merits (recognition).;C. ASC 740;allows a company to take into account the probability of audit by a tax;authority in step 1 (measurement) in its evaluation of its uncertain tax;positions.;D. ASC 740;allows a company to record a tax benefit from an uncertain tax position only if;it is probable the benefit will be sustained on audit by a tax authority.;61. As part of;its uncertain tax position assessment, Madison Corporation records interest and;penalties related to its unrecognized tax benefits of $1,000,000. Which of the following;statements about recording this amount is most correct?;A. Madison;must record the expense separate from its income tax provision.;B. Madison;can elect to include the expense as part of its income tax provision or record;the expense separate from its income tax provision, provided the company;discloses which option it chose.;C. Madison;must record the expense in its income tax provision.;D. Madison;does not record the expense until it is paid.;62. What;confidence level must management have that a tax position will be sustained on;audit before it can recognize any portion of the related deferred tax asset;under ASC 740?;A. More;likely than not;B. Reasonable;basis;C. Substantial;authority;D. Probable;63. Which of;the following statements about uncertain tax position disclosures is false?;A. ASC 740;requires a company to disclose the amount of unrecognized tax benefits for each;country in which it files a tax return;B. ASC 740;requires a company to disclose the aggregate amount of unrecognized tax;benefits, separated between U.S., state and local, and international tax;positions;C. ASC 740;requires a company to disclose the aggregate amount of unrecognized tax;benefits without separation between U.S., state and local, and international;tax positions;64. Which of;the following statements is true with respect to a company's effective tax rate;reconciliation?;A. The;hypothetical tax expense is the tax that would be due if the company's statutory;tax rate was applied to the company's net income from continuing operations.;B. The;hypothetical tax expense is the tax that would be due if the company's;statutory tax rate was applied to the company's taxable income.;C. The;hypothetical tax expense is the tax that would be due if the company's;statutory tax rate was applied to the company's book equivalent of taxable;income.;D. The;hypothetical tax expense is another name for the company's effective tax rate.;65. A;company's effective tax rate can best be described as;A. The;company's cash taxes paid divided by taxable income;B. The;company's cash taxes paid divided by net income from continuing operations;C. The;company's financial statement income tax provision divided by taxable income;D. The;company's financial statement income tax provision divided by net income from;continuing operations;66. Which of;the following statements best describes the disclosure of a company's deferred;tax assets and liabilities?;A. All four;categories of deferred tax accounts (current deferred tax assets and;liabilities and noncurrent deferred tax assets and liabilities) must be;separately disclosed in the balance sheet.;B. The four;categories of deferred tax accounts can be netted and disclosed as one;aggregate amount on the balance sheet.;C. Current;deferred tax assets and liabilities and noncurrent deferred tax assets and;liabilities can always be netted on the balance sheet.;D. Current;deferred tax accounts and noncurrent deferred tax accounts can be netted on the;balance sheet only if they arise in the same tax jurisdiction.;67. Which of;the following statements concerning the classification of deferred tax assets;and liabilities is false?;A. A;deferred tax asset is classified as noncurrent if the company expects the;future tax benefit to be received more than 12 months from the balance sheet;date.;B. A;deferred tax asset related to a bad debt reserve is classified as noncurrent if;the company expects the bad debt to be charged off more than 12 months from the;balance sheet date.;C. A;deferred tax asset related to a bad debt reserve is classified as current if;the related accounts receivable is classified as a current asset.;D. A;deferred tax asset related to inventory capitalization is classified as;noncurrent if the company uses a FIFO accounting method and the inventory to;which the deferred tax asset relates will not be treated as sold within 12;months from the balance sheet date.;68. ASC 740;requires a publicly traded company to disclose the components of its deferred;tax assets and liabilities only if the amounts are considered to be;A. Material;B. Significant;C. Pertinent;D. Important;69. Which of;the following temporary differences creates a current deferred tax liability?;A. Accumulated;depreciation on a building;B. Accumulated;amortization on a customer list (intangible with a five-year life);C. Unearned;revenue expected to be collected in the next 12 months;D. Deferred;compensation expected to be paid in the next 12 months;70. Which of;the following items is not a reconciling item in the income tax footnote?;A. Compensation;deduction related to incentive stock options;B. Compensation;deduction related to nonqualified stock options that were expensed for;financial accounting purposes;C. Domestic;production activities deduction;D. State and;local income taxes;71. Angel;Corporation reported pretax book income of $1,000,000. During the current year;the net reserve for warranties increased by $25,000. In addition, tax;depreciation exceeded book depreciation by $100,000. Finally, Angel subtracted;a dividends received deduction of $25,000 in computing its current year taxable;income. Using a tax rate of 34%, Angel's hypothetical tax expense in its;reconciliation of its income tax expense is;A. $340,000;B. $331,500;C. $314,500;D. $306,000;72. TarHeel Corporation;reported pretax book income of $1,000,000. During the current year, the net;reserve for warranties increased by $25,000. In addition, tax depreciation;exceeded book depreciation by $100,000. Finally, TarHeel subtracted a dividends;received deduction of $25,000 in computing its current year taxable income.;Assume a tax rate of 34%. TarHeel's accounting effective tax rate is;A. 34%;B. 33.15%;C. 31.45%;D. 30.6%;73. Green;Corporation reported pretax book income of $1,000,000. During the current year;the net reserve for warranties increased by $25,000. In addition, tax;depreciation exceeded book depreciation by $100,000. Finally, Green subtracted;a dividends received deduction of $25,000 in computing its current year taxable;income. Using a tax rate of 34%, Green's cash tax rate is;A. 34%;B. 33.15%;C. 31.45%;D. 30.6%;74. Which of;the following items would likely not be included in the computation of a;company's structural effective tax rate?;A. Tax;effects of international operations;B. Tax;effects of state and local operations;C. Tax;effects from the domestic production activities deduction;D. Tax;effects from goodwill impairment;75. Which of;the following statements best describes the ASC 740 rules related to the;disclosure of the components of deferred tax assets and liabilities in the;company's income tax note?;A. A;publicly traded company should disclose the approximate "tax effect;(dollar amounts) of all of the components of its deferred tax assets and;liabilities in a footnote to the financial statements.;B. A;publicly traded company should disclose the approximate "tax effect;(dollar amounts) of only those components of its deferred tax assets and;liabilities that give rise to a "significant" portion of net deferred;tax liabilities and deferred tax assets in a footnote to the financial;statements.;C. A privately-held;company should disclose the approximate "tax effect" (dollar amounts);of all of the components of its deferred tax assets and liabilities in a;footnote to the financial statements.;D. A;privately-held company should disclose the approximate "tax effect;(dollar amounts) of only those components of its deferred tax assets and;liabilities that give rise to a "significant" portion of net deferred;tax liabilities and deferred tax assets in a footnote to the financial statements.;Essay Questions;76. Gull;Corporation reported pretax book income of $2,000,000. Included in the;computation were favorable temporary differences of $300,000, unfavorable;temporary differences of $200,000, and favorable permanent differences of;$50,000. Assuming a tax rate of 34%, compute Gull's current income tax expense;or benefit.;77. Heron;Corporation reported pretax book income of $4,000,000. Included in the;computation were favorable temporary differences of $500,000, unfavorable;temporary differences of $700,000, and unfavorable permanent differences of;$200,000. Using a tax rate of 34%, compute Heron's current income tax expense;or benefit.;78. Sparrow;Corporation reported pretax book income of $5,000,000. During the current year;the reserve for warranties increased by $300,000. In addition, tax depreciation;exceeded book depreciation by $400,000. Finally, Sparrow received $50,000 of;tax-exempt interest from municipal bonds. Using a tax rate of 34%, compute;Sparrow's current income tax expense or benefit.;79. Cardinal;Corporation reported pretax book income of $3,000,000. During the current year;the reserve for bad debts increased by $200,000. In addition, book depreciation;exceeded tax depreciation by $100,000. Cardinal sold a fixed asset and reported;a book gain of $60,000 and a tax gain of $80,000. Finally, Cardinal deducted;$50,000 of domestic production activities deduction on its tax return. Using a;tax rate of 34%, compute Cardinal's current income tax expense or benefit.;80. Purple;Rose Corporation reported pretax book income of $500,000. Tax depreciation;exceeded book depreciation by $300,000. In addition, the company received;$250,000 of tax-exempt life insurance proceeds. The prior year tax return;showed taxable income of $100,000. Using a tax rate of 34%, compute Purple;Rose's current income tax expense or benefit.;81. Yellow;Rose Corporation reported pretax book income of $1,000,000. Tax depreciation;exceeded book depreciation by $100,000. During the year Yellow Rose capitalized;$50,000 into ending inventory under ?263A. Capitalized inventory costs of;$75,000 in beginning inventory were deducted as part of cost of goods sold on;the tax return. Using a tax rate of 34%, compute Yellow Rose's taxes payable or;refundable.;82. Milton;Corporation reported pretax book income of $2,500,000. Included in the computation;were favorable temporary differences of $400,000, unfavorable temporary;differences of $150,000, and favorable permanent differences of $100,000. Using;a tax rate of 34%, compute Milton's deferred income tax expense or benefit.;83. Frost;Corporation reported pretax book income of $3,000,000. Included in the;computation were favorable temporary differences of $200,000, unfavorable;temporary differences of $350,000, and unfavorable permanent differences of;$50,000. Using a tax rate of 34%, compute Frost's deferred income tax expense;or benefit.;84. Potter;Inc. reported pretax book income of $5,000,000. During the current year, the;reserve for bad debts increased by $100,000. In addition, tax depreciation;exceeded book depreciation by $300,000. Potter sold a fixed asset and reported;book gain of $60,000 and tax gain of $80,000. Finally, the company received;$50,000 of tax-exempt municipal bond interest. Using a tax rate of 34%, compute;Potter's deferred income tax expense or benefit.;85. Whitman;Corporation reported pretax book income of $400,000 in 2014. Book depreciation;exceeded tax depreciation by $100,000. In addition, the Company accrued;vacation pay of $50,000 that was not deductible until paid in 2015. Whitman has;a net operating loss carryforward of $200,000 from 2013. Assuming a tax rate of;34%, compute the Company's deferred income tax expense or benefit for 2014.;86. Farm;Corporation reported pretax book loss of $500,000 in 2014. Tax depreciation;exceeded book depreciation by $100,000. In addition, Farm received prepaid;income of $50,000, which was included on its tax return but was not included in;the book loss. Farm had $0 taxable income in 2013 and 2012. Assuming a tax rate;of 34%, compute the Company's deferred income tax expense or benefit for 2014.;87. Price;Corporation reported pretax book income of $600,000 in 2014. Tax depreciation;exceeded book depreciation by $100,000. In addition, the reserve for warranties;increased by $40,000. Price had a net deferred tax liability of $34,000 at the;beginning of the year, representing a net taxable temporary difference of;$100,000. During the year, the company's tax rate decreased from 34% to 30%.;Compute the Company's current and deferred income tax expense or benefit for;2014.;88. Stone;Corporation reported pretax book income of $1,000,000 in 2014. Tax depreciation;exceeded book depreciation by $300,000. In addition, the reserve for bad debts;decreased by $50,000. Stone had a net deferred tax asset of $29,000 at the;beginning of the year, representing a net deductible temporary difference of;$100,000. During the year, the company's tax rate increased from 29% to 30%.;Compute the Company's current and deferred income tax expense or benefit for;2014.;89. Identify;the following items as creating a temporary difference, permanent difference;or no difference.;90. Irish;Corporation reported pretax book income of $1,000,000 in 2014. Included in the;computation were favorable temporary differences of $300,000, unfavorable;temporary differences of $100,000, and favorab

 

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