Reference no: EM132820851

Questions -

Q1. Woodward Corporation reported pretax book income of $1,000,000. Included in the computation were favorable temporary differences of $200,000, unfavorable temporary differences of $50,000, and favorable permanent differences of $100,000. Compute the company's current income tax expense or benefit.

Q2. Chandler Corporation reported pretax book income of $2,000,000. Tax depreciation exceeded book depreciation by $500,000. During the year the company capitalized $250,000 into ending inventory under §263A. Capitalized inventory costs of $150,000 in beginning inventory were deducted as part of cost of goods sold on the tax return. Compute the company's taxes payable or refundable.

Q3. Davison Company determined that the book basis of its office building exceeded the tax basis by $800,000. This basis difference is properly characterized as

a. a permanent difference.

b. taxable temporary difference.

c. deductible temporary difference.

d. favorable book-tax difference.

e. Both (b) and (d) above are correct.

Q4. Which of the following items is not a temporary book-tax basis difference?

-Warranty reserve accruals.

-Accelerated depreciation.

-Capitalized inventory costs under §263A.

-Nondeductible stock option compensation from exercising an ISO.

-All of the above are temporary differences.

Q5. Which of the following book-tax differences does not have a favorable temporary book-tax basis difference?

a. Tax depreciation for the period exceeds book depreciation.

b. Bad debts charged off in the current period exceed the bad debts accrued in the current period.

c. Inventory costs capitalized under §263A deducted as part of current-year tax cost of goods sold are less than the inventory costs capitalized in ending inventory.

d. Vacation pay accrued for tax purposes in a prior period is deducted in the current period.

e. All of the above have a favorable temporary book-tax difference.

Q6. Shaw Inc. reported pretax book income of $10,000,000. During the current year, the reserve for bad debts increased by $100,000. In addition, tax depreciation exceeded book depreciation by $200,000. Shaw Inc. sold a fixed asset and reported book gain of $50,000 and tax gain of $75,000. Finally, the company received $250,000 of tax-exempt life insurance proceeds from the death of one of its officers. Compute the company's deferred income tax expense or benefit.