Reference no: EM133095158
Questions -
Q1. Penny Corporation, at the end of 2021, its first year of operations, prepared the reconciliation between pretax financial income and taxable income as follows:
Pretax financial income - $750,000
Estimated litigation expense - 1,000,000
Extra depreciation for taxes (1,500,000)
Taxable income - $250,000
The estimated litigation expense of $1,000,000 will be deductible in 2023 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $500,000 in each of the next 3 years. Estimated tax payments for the year is $35,000. The income tax rate is 30% for all years. What amount is the income tax payable to be presented in the statement of financial position at year end?
Q2. At the beginning of 2020, Valo Corporation leased an equipment with the following information: Annual rental payable at the end of each year - $450,000; residual value guarantee - $50,000; Lease incentive received - $20,000; Lease term - 4 years; Useful life of the equipment - 8 years; implicit interest rate - 10%; present value of an ordinary annuity of 1 at 10% for 4 periods - 3.17; present value of 1 at 10% for 4 periods - 0.68. How much is the cost of right of use asset?
Q3. On January 1, 2021, Dom Company purchased investment securities for $1,200,000. The securities are classified as trading. By December 31, 2021, the securities had a fair value of $1,680,000 but had not yet been sold. The company recognized a $320,000 restructuring charge during the year. The restructuring charge is composed of an impairment write-down on a manufacturing facility. Tax rules do not allow a deduction for the write-down unless the facility is actually sold. The facility was not sold by the end of the year. Excluding the trading securities and the restructuring the charge, income before taxes for the year was $4,000,000. The income tax rate for the current year and future years is 30%. How much is Dom's current tax expense?
Q4. On January 1, 2021, Roma Corporation received $107,720 for a $100,000 face amount, 12% bond, a price that yields 10%. The bonds pay interest semi-annually. The entity elects the fair value option for valuing financial liabilities. On December 31, 2021, the fair value of the bond is determined to be $106,460. The entity recognized interest expense of $12,000 in the 2021 income statement. How much was the gain or loss recognized in the income statement to report this bond at fair value?
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