Reference no: EM131777191

Question -

Q1. On December 31, 2003, Jason Company adopted the dollar-value LIFO retail inventory method.  Inventory data for 2004 are as follows:

                                                        LIFO Cost                 Retail

Inventory, 12/31/03                           $360,000                   $500,000

Inventory, 12/31/04                           ?                               660,000

Increase in price level for 2004                                            10%

Cost-retail ratio for 2004                                                     70% 

Under the dollar-value LIFO retail method, Jason's inventory at December 31, 2004 is

A. $483,200

B. $462,000

C. $472,000

D. $437,000

Q2. On January 2, 2004, Lem Corp. bought machinery under a contract that required a down payment of $10,000, plus 24 monthly payments of $5,000 each, for total cash payments of $130,000.  The cash equivalent price of the machinery was $110,000.  The machinery has an estimated useful life of 10 years and estimated salvage value of $5,000.  Lem uses straight-line depreciation.  In its 2004 income statement, what amount should Lem report as depreciation for this machinery?

A. $12,500

B. $13,000

C. $11,000

D. $10,500

Q3. Stone Co. began operations in 2004 and reported $225,000 in income before income taxes for the year.  Stone's 2004 tax depreciation exceeded its book depreciation by $25,000.  Stone also had nondeductible book expenses of $10,000 related to permanent differences.  Stone's tax rate for 2004 was 40%, and the enacted rate for years after 2004 is 35%.  In its December 31, 2004 balance sheet, what amount of deferred income tax liability should Stone report?

A. $14,000

B. $8,750

C. $10,000

D. $12,250