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On January 3, 2014, Menke Company acquired $300,000 of Carlin Company's 10-year

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Question;1. On January 3, 2014, Menke Company acquired $300,000 of;Carlin Company's 10-year, 10% bonds at a price of $319,254 to yield 9%.;Interest is payable each December 31. The bonds are classified as;held-to-maturity. Assuming that Menke Company uses the effective-interest;method, what is the amount of interest revenue that would be recognized in 2015;related to these bonds? (Points: 4);$30,000;$31,925;$28,734;$28,619;Question 2.2. On August 1, 2014, Kern Company acquired 800;$1,000, 9% bonds at 97 plus accrued interest. the bonds were dated May 1, 2014;and mature on April 30, 2020, with interest paid each October 31 and April 30.;The bonds will be added to Kern's available-for-sale portfolio. The preferred;entry to record the purchase of the bonds on August 1, 2014 will include;(Points: 4);a debit to Debt Investments of $776,000.;a debit to Debt Investments of $800,000.;a debit to cash of $794,000.;a credit to cash of $776,000.;Question 3.3. Richman Inc. had the following investments in;equity securities;Cost Fair Value 12/31/14 Fair Value 12/31/15;Trading $600,000 $800,000 $760,000;Available-for-sale $600,000 $640,000 $720,000;What amount of gain or loss would Richman report in its;income statement for the year ended December 31, 2015 related to its investments?;(Points: 4);$40,000 gain;$40,000 loss;$280,000 gain;$160,000 gain;Question 4.4.;On its December 31, 2014 balance sheet, Harrison Company;appropriately reported a $10,000 debit balance in its Fair Value Adjustment;(available-for-sale) account. There was no change during 2015 in the;composition of Harrison?s portfolio of equity investments held as;available-for-sale securities. The following information pertains to this;portfolio;Security Cost Fair Value at 12/31/15;X $125,000 $160,000;Y $100,000 $90,000;Z $175,000 $125,000;$400,000 $375,000;The amount of unrealized loss to appear as a component of;comprehensive income for the year ending December 31, 2015 is;(Points: 4);$35,000.;$25,000.;$15,000.;$0.;Question 5.5. Colorado Company bought 18,000 shares of the;voting common stock of Rodger Corporation in January 2014. In December, Rodger;announced $200,000 net income for 2014 and declared and paid a cash dividend of;$2 per share on the 200,000 shares of outstanding common stock. Colorado;Company's dividend revenue from Rodger Corporation in December 2014 would be;(Points: 4);$ 0.;$32,000.;$56,000.;$36,000;Question 6.6.;Darby Company owns 20,000 of the 50,000 outstanding shares;of Taylor, Inc. common stock. During 2015, Taylor earns $1,000,000 and pays;cash dividends of $800,000.;If the beginning balance in the investment account was;$625,000, the balance at December 31, 2015 should be;(Points: 4);$1,025,000.;$825,000.;$705,000.;$625,000.;Question 7.7. Tompkins Inc. incurred a financial and taxable;loss for 2015. Tompkins therefore decided to use the carryback provisions, as;it had been profitable up to this year. How should the tax benefit related to;the carryback be reported in the 2015 financial statements? (Points: 4);The refund claimed should be reported as a prior period;adjustment.;The refund claimed should be reported as a deferred charge;and amortized over five years.;The refund claimed should be reported as revenue in the;current year.;The refund claimed should be shown as a reduction of the;loss in 2015.;Question 8.8. Hopkins Co. at the end of 2014, its first year;of operations, prepared a reconciliation between pretax financial income and;taxable income as follows;Pretax financial income $1,500,000;Estimated litigation expense 2,000,000;Extra depreciation for taxes (3,000,000);Taxable income $ 500,000;The estimated litigation expense of $2,000,000 will be;deductible in 2015 when it is expected to be paid. Use of the depreciable;assets will result in taxable amounts of $1,000,000 in each of the next three;years. The income tax rate is 30% for all years.;2014 income taxes payable is;(Points: 4);$0.;$150,000.;$300,000.;$450,000.;Question 9.9. Hopkins Co. at the end of 2014, its first year;of operations, prepared a reconciliation between pretax financial income and;taxable income as follows;Pretax financial income $1,500,000;Estimated litigation expense 2,000,000;Extra depreciation for taxes (3,000,000);Taxable income $ 500,000;The estimated litigation expense of $2,000,000 will be;deductible in 2015 when it is expected to be paid. Use of the depreciable;assets will result in taxable amounts of $1,000,000 in each of the next three;years. The income tax rate is 30% for all years.;2014 income tax expense is;(Points: 4);$150,000.;$300,000.;$450,000.;$600,000;Question 10.10.;Cross Company reported the following results for the year;ended December 31, 2014, its;first year of operations;2014;Income (per books before income taxes) $ 1,500,000;Taxable income 2,400,000;The disparity between book income and taxable income is;attributable to a temporary difference which will reverse in 2015. What should;Cross record as a net deferred tax asset or liability for the year ended;December 31, 2014, assuming that the enacted tax rates in effect are 40% in;2014 and 35% in 2015? (Points: 4);$360,000 deferred tax liability;$315,000 deferred tax asset;$360,000 deferred tax asset;$315,000 deferred tax liability;Urgency: HIGH;11.;Nickerson Corporation began operations in 2013. There have;been no permanent or;temporary differences to account for since the inception of;the business. The following data are available;Year;2013;2014;2015;2016;Enacted Tax Rate;45%;40%;35%;30%;Taxable Income;$1,500,000;1,800,000;Taxes Paid;$675,000;720,000;In 2015, Nickerson had an operating loss of $1,860,000. What;amount of income tax benefits should be reported on the 2015 income statement;due to this loss assuming that it uses the carryback provision? (Points: 4);$819,000.;$747,000.;$744,000.;$558,000.;Question 12.12. Endeavor Inc. had one temporary difference;at the end of 2014, due to installment sales revenue, that will reverse and;cause taxable amounts of $100,000 in 2015, 125,000 in 2016, and $75,000 in;2017. The tax rate is 40% for all years. There are no deferred taxes at the;beginning of 2014.;The 2015 journal entry to record income taxes will include;(Points: 4);a $40,000 debit to Deferred Tax Liability;a $40,000 credit to Deferred Tax Liability;an $80,000 debit to Deferred Tax Liability;an $80,000 credit to Deferred Tax Liability;Question 13.13.;Wright Co., organized on January 2, 2014, had pretax;accounting income of $640,000 and taxable income of $2,080,000 for the year;ended December 31, 2014. The only temporary difference is accrued product;warranty costs which are expected to be paid as follows;2015 480,000;2016 240,000;2017 240,000;2018 480,000;The enacted income tax rates are 35% for 2014, 30% for 2015;through 2017, and 25% for 2018. If Wright expects taxable income in future;years, the deferred tax asset in Wright's December 31, 2014 balance sheet;should be (Points: 4);$288,000;$336,000;408,000;$504,000;17. Held-to-maturity securities are reported in;the balance sheet at (Points: 4);acquisition;cost.;acquisition;cost plus amortization of a premium.;acquisition cost plus amortization of a discount.;fair;value.Question;Question 19.19. Which of the following causes a permanent difference between taxable income and pretax accounting income? (Points: 4)the installment method used for sales of property.MACRS depreciation method used for equipment.interest income on municipal bonds.percentage-of-completion method for long-term construction contracts.21. In 2015, Instar Inc. decides to add a 24-month warranty;on its new product sales. Warranty costs are tax deductible when claims are;settled. In its financial statements for 2015, Noah Inc incurs: (Points: 4);A decrease in a deferred tax asset.;An increase in a deferred tax asset.;An increase in a deferred tax liability.;A decrease in a deferred tax liability.;Question 22.22. Which of the following best describes the;how to account for the difference between a company's financial income and;taxable income, under generally accepted accounting principles? (Points: 4);Computation of deferred income tax based on temporary and;permanent differences.;Computation of deferred income tax based on permanent;differences.;Computation of income tax expense based on taxable income.;Computation of deferred tax assets and liabilities based on;temporary differences

 

Paper#52080 | Written in 18-Jul-2015

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