Reference no: EM132990542

Questions -

Q1. Norman Company operates a leasing business. In year 2020, Norman Company leased its building to Lemon Company. The agreement provided that the lease term is good for 10 years beginning January 1, 2020. The rent for first year is 580,000 and 650,000 for second year through tenth year. Norman Company allowed to use the building rent-free for the first two months. Tax rate 30%. What amount should be recognized as deferred tax asset on Norman Company's Balance Sheet for the year end, December 31, 2020?

a. 29,000 b. 174,000 c. 204,000 d. 1450,000 e. 0

Q2. The following information is available for Dee Company after its first year of operations:

Income before taxes 250,000

Federal income tax payable 104,000

Deferred income tax (4,000)

Income tax expense 100,000

Net income 150,000

Dee estimates its annual warranty expense as a percentage of sales. The amount charged to warranty expense on its books was 95,000. Assuming a 40% income tax rate, what amount was actually paid this year for warranty claims?

a. 105,000 b. 100,000 c. 95,000 d. 85,000

Q3. For calendar year 2020, Tris Corp. reported depreciation of 1,200,000 in its income statement. On its 2020 income tax return, Tris reported depreciation of 1,800,000. Tris's income statement also included 225,000 accrued warranty expense that will be deducted for tax purposes when paid. Tris's enacted tax rates are 30% for 2020 and 2021, and 24% for 2022 and 2023. The depreciation difference and warranty expense will reverse over the next three years as follows:

Depreciation Difference Warranty Expense

2021 240,000 45,000

2022 210,000 75,000

2023 150,000 105,000

600,000 225,000

These were Tris's only temporary differences. In Tris's 2020 income statement, the deferred tax expense should be

a. 200,700 b. 112,500 c. 101,700 d. 109,800