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Question;1572. MC #1;Purple, Inc., a domestic corporation, owns 100% of Blue, Ltd., a foreign;corporation and Yellow, Inc., a domestic corporation. Purple also owns 40% of;Green, Inc., a domestic corporation. Purple receives no distributions from any;of these corporations. Which of these entities? net income are included in;Purple?s GAAP income statement for current year financial reporting purposes?;a.;Purple, Blue, Yellow, and Green.;b. Purple, Blue, and Yellow.;c. Purple, Blue, and Green.;d. Purple, Yellow, and Green.;1573. MC #2;Create, Inc., a domestic corporation, owns 100% of Vinyl, Ltd., a foreign;corporation and Digital, Inc., a domestic corporation. Create also owns 12% of;Record, Inc., a domestic corporation. Create receives no distributions from any;of these corporations. Which of these entities? net income are included in;Create?s income statement for current year financial reporting purposes?;a.;Create, Vinyl, Digital, and Record.;b. Create, Vinyl, and Record.;c. Create, Vinyl, and Digital.;d. Create, Digital, and Record.;e. None of the above.;1574. MC #3;Purple, Inc., a domestic corporation, owns 80% of Blue, Ltd., a foreign;corporation and Yellow, Inc., a domestic corporation. Purple also owns 50% of;Green, Inc., a domestic corporation. Purple receives no distributions from any;of these corporations. Which of these entities? net income are included in;Purple?s Federal tax return for the current year assuming Purple elects to;include all eligible entities in its consolidated Federal income tax return?;a.;Purple, Blue, Yellow, and Green.;b. Purple, Blue, and Yellow.;c. Purple, Blue, and Green.;d. Purple and Yellow.;1575. MC #4;Create, Inc., a domestic corporation, owns 90% of Vinyl, Ltd., a foreign corporation;and Digital, Inc., a domestic corporation. Create also owns 60% of Record;Inc., a domestic corporation. Create receives no distributions from any of;these corporations. Which of these entities? net income are included in;Create?s Federal tax return for the current year assuming Create elects to;include all eligible entities in its consolidated Federal income tax return?;a.;Create and Digital.;b. Create, Vinyl, and Digital.;c. Create, Vinyl, and Record.;d. Create, Vinyl, Digital, and Record.;1576. MC #5;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. Local income taxes.;c. Foreign income taxes.;d. Federal income taxes.;e. All the above taxes are included.;1577. MC #6;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. Local income taxes.;c. Foreign income taxes.;d. Federal income taxes.;e. All the above taxes are included;1578. MC #7;Which of the following items represents a temporary book-tax difference?;a.;Municipal bond interest.;b. Compensation-related expenses.;c. Meals and entertainment expense;deduction.;d. Nondeductible penalties.;1579. MC #8;Phyllis, Inc., earns book net income before tax of $600,000. Phyllis puts into;service a depreciable asset this year, and first year tax depreciation exceeds;book depreciation by $120,000. Phyllis has recorded no other temporary or;permanent book-tax differences. Assuming that the U.S. tax rate is 35%, what is;Phyllis?s total income tax expense reported on its GAAP financial statements?;a.;$252,000.;b. $210,000.;c. $168,000.;d. $42,000.;1580. MC #9;Gravel, Inc., earns book net income before tax of $600,000. Gravel puts into;service a depreciable asset this year, and first year tax depreciation exceeds;book depreciation by $120,000. Gravel has recorded no other temporary or;permanent book-tax differences. Assuming that the U.S. tax rate is 35%, what is;Gravel?s current income tax expense reported on its GAAP financial statements?;a.;$252,000.;b. $210,000.;c. $168,000.;d. $42,000.;1581. MC #10;Clipp, Inc., earns book net income before tax of $600,000. Clipp puts into;service a depreciable asset this year, and first year tax depreciation exceeds;book depreciation by $120,000. Clipp has recorded no other temporary or;permanent book-tax differences. Assuming that the U.S. tax rate is 35%, what is;Clipp?s deferred income tax liability reported on its GAAP financial;statements?;a.;$252,000.;b. $210,000.;c. $168,000.;d. $42,000.;1582. MC #11;Jogg, Inc., earns book net income before tax of $600,000. Jogg puts into;service a depreciable asset this year, and first year tax depreciation exceeds;book depreciation by $120,000. Jogg has recorded no other temporary or;permanent book-tax differences. Assuming that the U.S. tax rate is 35%, and;that this is Jogg?s first year of operations, what is Jogg?s balance in its;deferred tax asset and deferred tax liability accounts at year end?;a.;$42,000 and $0.;b. $0 and $42,000.;c. $42,000 and $42,000.;d. $0 and $0.;1583. MC #12;Qute, Inc., earns book net income before tax of $500,000. In computing its book;income, Qute deducts $50,000 more in warranty expense for book purposes than is;allowed for tax purposes. Qute records no other temporary or permanent book-tax;differences. Assuming that the U.S. tax rate is 35% and no valuation allowance;is required, what is Qute?s total income tax expense reported on its GAAP;financial statements?;a.;$192,500.;b. $175,000.;c. $157,500.;d. $17,500.;1584. MC #13;Morrisson, Inc., earns book net income before tax of $500,000. In computing its;book income, Morrisson deducts $50,000 more in warranty expense for book;purposes than is allowed for tax purposes. Morrisson records no other temporary;or permanent book-tax differences. Assuming that the U.S. tax rate is 35% and;no valuation allowance is required, what is Morrisson?s current income tax;expense reported on its GAAP financial statements?;a.;$192,500.;b. $175,000.;c. $157,500.;d. $17,500.;1585. MC #14;Never, Inc., earns book net income before tax of $500,000. In computing its;book income, Never deducts $50,000 more in warranty expense for book purposes;than is allowed for tax purposes. Never records no other temporary or permanent;book-tax differences. Assuming that the U.S. tax rate is 35% and no valuation;allowance is required, what is Never?s deferred income tax asset reported on;its GAAP financial statements?;a.;$192,500.;b. $175,000.;c. $157,500.;d. $17,500.;1586. MC #15;South, Inc., earns book net income before tax of $400,000 in 2010. South;acquires a depreciable asset in 2010, and first year tax depreciation exceeds;book depreciation by $50,000. At the end of 2010, South?s deferred tax;liability account balance is $17,500. In 2011, South earns $500,000 book net;income before tax, and its book depreciation exceeds tax depreciation by;$20,000. South records no other temporary or permanent book-tax differences.;Assuming that the U.S. tax rate is 35%, what is South?s total income tax;expense reported on its GAAP financial statements for 2011?;a.;$182,000.;b. $175,000.;c. $168,000.;d. $7,000.;1587. MC #16;South, Inc., earns book net income before tax of $400,000 in 2010. South;acquires a depreciable asset in 2010, and first year tax depreciation exceeds book;depreciation by $50,000. At the end of 2010, South?s deferred tax liability;account balance is $17,500. In 2011, South earns $500,000 book net income;before tax, and its book depreciation exceeds tax depreciation by $20,000.;South records no other temporary or permanent book-tax differences. Assuming;that the U.S. tax rate is 35%, what is South?s current income tax expense;reported on its GAAP financial statements for 2011?;a.;$182,000.;b. $175,000.;c. $168,000.;d. $7,000.;1588. MC #17;South, Inc., earns book net income before tax of $400,000 in 2010. South;acquires a depreciable asset in 2010, and first year tax depreciation exceeds;book depreciation by $50,000. At the end of 2010, South?s deferred tax;liability account balance is $17,500. In 2011, South earns $500,000 book net;income before tax, and its book depreciation exceeds tax depreciation by;$20,000. South records no other temporary or permanent book-tax differences.;Assuming that the U.S. tax rate is 35%, what is South?s balance in its deferred;tax liability account at the end of 2011?;a.;$17,500.;b. $10,500.;c. $7,000.;d. $0.;1589. MC #18;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.;1590. MC #19;Cold, Inc., reported a $100,000 total tax expense for financial statement;purposes in 2010. 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 2011, Cold reports $600,000 in book net income before tax. Cold;records no other permanent or temporary book-tax differences for 2011. At the;end of 2011, 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 2011?;a.;$210,000.;b. $170,000.;c. $250,000.;d. $40,000.;1591. MC #20;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 GAAP book purposes, assuming that 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%.;1592. MC #21;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 GAAP book purposes, assuming that Beach makes the permanent;reinvestment assumption of ASC 740-30 (APB 23)?;a.;38.75%.;b. 31.25%.;c. 35%.;d. 25.63%.;1593. MC #22;Which of the following items are not included in the GAAP financial statement;income tax note?s 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 is included in the;note.;1594. MC #23;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.;1595. MC #24;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.;1596. MC #25;Hot, Inc.?s primary competitor is Cold, Inc. When comparing relative deferred;tax asset and liability accounts with Cold, which of the following benchmarking;activities should Hot undertake?;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.;1597. MC #26;Collins, Inc., reports an effective tax rate in its income tax footnote of 14%.;The only reconciling item with regard to 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.;1598. MC #27;Which of the following statements best describes considerations regarding a;company?s tax expense that may be made by users of GAAP financial statements?;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 observations are;correct.

 

Paper#59246 | Written in 18-Jul-2015

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