Reference no: EM133003992

Questions -

Q1. The Indy Company had taxable income of 12,000 during 2020. Indy used accelerated depreciation for tax purposes (3,400) and straight-line depreciation for accounting purposes ( 2,000). Assuming Indy had no other temporary differences, what would the company's pretax accounting income be for 2020?

a. 1,400

b. 6,600

c. 13,400

d. 17,400

Q2. The following information is taken from Blackhawk Corporation's 2020 financial records:

Pretax accounting income 1,500,000

Excess tax depreciation (45,000)

Taxable income 1,455,000

Assume the taxable temporary difference was created entirely in 2020 and will reverse in equal net taxable amounts in each of the next three years. If tax rates are 40 percent in 2020, 35 percent in 2021, 35 percent in 2022, and 30 percent in 2023, then the total deferred tax liability Blackhawk should report on its December 31, 2020, balance sheet is

a. 13,500.

b. 15,000.

c. 15,750.

d. 18,000.

Q3. Schaeffer Products, Inc., reported an excess of warranty expense over warranty deductions of 72,000 for the year ended December 31, 2020. This temporary difference will reverse in equal amounts over the years 2021 to 2023. The enacted tax rates are as follows:

2020 40%

2021 35%

2022 30%

2023 25%

The reporting for this temporary difference at December 31, 2020, would be

a. a deferred tax liability of 28,800.

b. a deferred tax asset of 28,800.

c. a deferred tax liability of 21,600.

d. a deferred tax asset of 21,600.

Q4. In 2021, The Worf Company, reported pretax financial income of 500,000. Included in that pretax financial income was 90,000 of nontaxable life insurance proceeds received as a result of the death of an officer; 120,000 of warranty expenses accrued but unpaid as of December 31, 2021; and 20,000 of life insurance premiums for a policy for an officer. Assuming that no income taxes were previously paid during the year and assuming an income tax rate of 40 percent, the amount of income taxes payable on December 31, 2021, would be

a. 180,000.

b. 200,000.

c. 212,000.

d. 220,000.

Q5. Viking Corporation reported depreciation of 250,000 on its 2020 tax return. However, in its 2020 income statement, Viking reported depreciation of 100,000. The difference in depreciation is a temporary difference that will reverse over time. Assuming Viking's tax rate is constant at 30 percent, what amount should be added to the deferred income tax liability in Viking's December 31, 2020, balance sheet?

a. 30,000

b. 37,500

c. 45,000

d. 75,000

Q6. Cowboy Corporation reported depreciation of 450,000 on its 2020 tax return. However, in its 2020 income statement, Cowboy reported depreciation of 300,000--as well as 30,000 interest revenue on tax-free bonds. The difference in depreciation is only a temporary difference, and it will reverse equally over the next three years. Cowboy's enacted income tax rates are as follows:

2020 35%

2021 30%

2022 25%

2023 20%

What amount should be included in the deferred income tax liability in Cowboy's December 31, 2020, balance sheet?

a. 30,000

b. 37,500

c. 45,000

d. 52,500

Q7. The books of the Tracker Company for the year ended December 31, 2020, showed pretax income of 360,000. In computing the taxable income for federal income tax purposes, the following timing differences were taken into account:

Depreciation deducted for tax purposes in excess of depreciation recorded on the books 16,000

Income from installment sale reportable for tax purposes in excess of income recognized on the books 12,000

What should Tracker record as its current federal income tax liability at December 31, 2020, assuming a corporate income tax rate of 30 percent?

a. 99,600

b. 103,200

c. 106,800

d. 108,000

Q8. Frey Corporation's income statement for the year ended December 31, 2020, shows pretax income of 1,000,000. The following items are treated differently on the tax return and in the accounting records:

Tax Accounting Return Records

Rent income 70,000 120,000

Depreciation expense 280,000 220,000

Premiums on officers' life insurance -- 90,000

Assume that Frey's tax rate for 2020 is 30 percent. What is the amount of income tax payable for 2020?

a. 360,000

b. 320,000

c. 294,000

d. 267,000

Q9. Inventive Corporation's income statement for the year ended December 31, 2020, shows pretax income of 300,000. The following items are treated differently on the tax return and in the accounting records:

Tax Accounting Return Records

Warranty expense 170,000 185,500

Depreciation expense 150,000 100,000

Premiums on officers' life insurance -- 60,000

Assume that Inventive's tax rate for 2020 is 40 percent. What is the current portion of Inventive's total income tax expense for 2020?

a. 106,200

b. 120,200

c. 130,200

d. 144,200

Q10. For the current year, Santa Fe Company reported income tax expense of 195,000. Income taxes payable at the end of the prior year were 125,000 and at the end of the current year were 130,000. The deferred tax liability classified as noncurrent that resulted from the use of MACRS for tax purposes and straight-line depreciation for financial reporting purposes increased from 120,000 at the beginning of the current year to 123,000 at the end of the current year. How much cash was paid for income taxes during the year?

a. 187,000

b. 197,000

c. 195,000

d. 190,000

Q11. Bench Company reported 7,500,000 income before provision for income tax.

The following data are provided for the current year:

Rent received in advance 1,800,000

Income from exempt municipal bonds 2,300,000

Depreciation deduction for income tax purposes in excess of depreciation reported for financial reporting 1,200,000

Tax payment during the current year 700,000

Income Tax Rate 30%

What amount of current income tax liability should be reported at year-end?

a. 1,020,000

b. 1,030,000

c. 1,040,000

d. 1,050,000

Q12. Hammer Company reported pretax financial income of 6,200,000 for the current year. Included in other income was 200,000 of interest revenue from the government bonds held by the entity. The income statement included depreciation expense of 500,000 with a machine cost of 3,000,000. The income tax return reported 600,000 as a depreciation on the machine. The enacted tax rate is 30% for the current year and future years. What is the current tax expense for the current year?

a. 1,860,000 c. 1,770,000

b. 1,800,000 d. 1,830,000

Q13. EZ Company provides the following data for their first year of operations:

Pretax financial income 1,500,000

Nontaxable interest received (100,000)

Depreciation in excess of financial depreciation 50, 000

Rent received in advance 150,000

Corporate tax rate 30%

What amount should be reported as total income tax expense?

a. 420,000

b. 540,000

c. 450,000

d. 0

Q14. Malyn Company reported 350,000 in income before the income tax. Life insurance proceeds amounting to 50,000 and life insurance for officer amounting to 20,000. How much is the income subject to tax?

a. 220,000

b. 320,000

c. 370,000

d. 70,000

Q15. The following information is available for Simon 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

Simon estimated 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