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1.;A company would most likely choose the carryforward option for a net operating loss if the company expected;Answer;higher tax rates in the future compared to the past.;lower tax rates in the future compared to the past.;lower earnings in the future compared to the past.;higher earnings in the future compared to the past.;2 points;Question 2;1.;A deferred tax liability arising from the use of an accelerated method of depreciation for tax purposes and the straight-line method for financial reporting purposes would be classified on the balance sheet as;Answer;a current liability.;a noncurrent liability.;a current liability for the portion of the temporary difference reversing within a year and a noncurrent liability for the remainder.;an offset to the accumulated depreciation reported on the balance sheet.;2 points;Question 3;1.;All of the following can result in a temporary difference between pretax financial income and taxable income except;Answer;payment of premiums for life insurance.;depreciation expense.;contingent liabilities.;product warranty costs.;2 points;Question 4;1.;Alpha had taxable income of $1,500 during 2014. Alpha used accelerated depreciation for tax purposes ($2,000) and straight-line depreciation for financial reporting purposes ($800). On December 30, 2014, Alpha collected the January 2015 rent of $600 on a lot it rents on a month-by-month basis to Zenith. Alpha?s pretax accounting income for 2014 would be;Answer;$900.;$2,100.;$3,300.;$3,700.;2 points;Question 5;1.;An example of a "deductible temporary difference" occurs when;Answer;the installment sales method is used for tax purposes, but the accrual method of recognizing sales revenue is used for financial reporting purposes.;warranty expenses are recognized on the accrual basis for financial reporting purposes but recognized as the warranty conditions are met for tax purposes.;accelerated depreciation is used for tax purposes but straight-line depreciation is used for accounting purposes.;the completed-contract method of recognizing construction revenue is used for tax purposes, but the percentage-of-completion method is used for financial reporting purposes.;2 points;Question 6;1.;An item that would create a permanent difference in pretax financial and taxable incomes would be;Answer;using accelerated depreciation for tax purposes and straight-line depreciation for book purposes.;purchasing equipment previously leased with an operating lease in prior years.;using the percentage-of-completion method on long-term construction contracts.;paying fines for violation of laws.;2 points;Question 7;1.;Which of the following creates a permanent difference between financial income and taxable income?;Answer;Interest received on municipal bonds;Completed contract method of recognizing construction revenue;Unearned rent revenue;Accelerated cost recovery on plant and equipment;2 points;Question 8;1.;Which of the following creates a temporary difference between financial and taxable income?;Answer;Fines from violation of law;Interest on municipal bonds;Accelerated cost recovery on plant and equipment;Premiums paid for officer's life insurance (company is beneficiary);2 points;Question 9;1.;The data shown below represent the complete taxable income history for Confederacy Corporation. The tax rate was 35% throughout the entire period 2008 through 2015;Taxable;Year Income;2008 $ 15,000;2009 $ 5,000;2010 $ 30,000;2011 $ 10,000;2012 $(50,000);2013 $(10,000);2014 $ 25,000;2015 $ 25,000;If the company always chooses the carryback, carryforward option, what is the tax liability for 2014?;Answer;$1,750;$8,750;$5,250;$0;2 points;Question 10;1.;Which of the following represents a permanent difference?;Answer;Point-of-sale revenue recognition for financial reporting purposes, installment method for tax purposes;Goodwill amortization deducted on the tax return but not amortized for financial reporting purposes;Straight-line depreciation for financial reporting purposes, accelerated depreciation for tax purposes;Carryback, carryforward option for taxes, no such option for financial reporting purposes;2 points;Question 11;1.;Which of the following is the most likely item to result in a deferred tax asset?;Answer;Using accelerated depreciation for tax purposes but straight-line depreciation for accounting purposes;Using the completed-contract method of recognizing construction revenue tax purposes, but using percentage-of-completion method for financial reporting purposes;Prepaid expenses;Unearned revenues;2 points;Question 12;1.;Which of the following items results in a temporary difference deductible amount for a given year?;Answer;Premiums on officer's life insurance (company is beneficiary);Premiums on officer's life insurance (officer is beneficiary);Vacation pay accrual;Accelerated depreciation for tax purposes, straight-line for financial reporting purposes;2 points;Question 13;1.;Amengual Corporation began operations in 2011 and had operating losses of $400,000 in 2012 and $300,000 in 2013. For the year ended December 31, 2014, Amengual had a pretax financial income of $600,000. For 2012 and 2013, assume an enacted tax rate of 30 percent, and for 2014 a 35 percent tax rate. There were no temporary differences in any of the years. In Amengual's 2014 income statement, how much should be reported as income tax expense?;Answer;$0;$30,000;$180,000;$210,000;2 points;Question 14;1.;In 2014, Ryan Corporation reported $85,000 net income before income taxes. The income tax rate for 2014 was 30 percent. Ryan had an unused $65,000 net operating loss carryforward arising in 2013 when the tax rate was 35 percent. The income tax expense Ryan would report for 2014 would be;Answer;$7,000.;$6,000.;$24,600.;$32,000.;2 points;Question 15;1.;The purpose of an interperiod income tax allocation is to;Answer;allow reporting entities to fully utilize tax losses carried forward from a previous year.;allow reporting entities whose tax liabilities vary significantly from year to year to smooth payments to taxing agencies.;recognize an asset or liability for the tax consequences of temporary differences that exist at the balance sheet date.;amortize the deferred tax liability shown on the balance sheet.

 

Paper#79824 | Written in 18-Jul-2015

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