Reference no: EM132822854

Questions -

Q1. Lynch Company had a net deferred tax asset of $68,000 at the beginning of the year, representing a net taxable deductible difference of $200,000 (taxed at 34 percent). During the year, Lynch reported pretax book income of $800,000. Included in the computation were favorable temporary differences of $20,000 and unfavorable temporary differences of $50,000. At the beginning of the year, Congress reduced the corporate tax rate to 21 percent. Lynch's deferred income tax expense or benefit for the current year would be:

-Net deferred tax benefit of $6,300.

-Net deferred tax expense of $6,300.

-Net deferred tax benefit of $32,300.

-Net deferred tax expense of $19,700.

Q2. Angel Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $25,000. In addition, tax depreciation exceeded book depreciation by $100,000. Finally, Angel subtracted a dividends received deduction of $25,000 in computing its current-year taxable income. Angel's hypothetical tax expense in its reconciliation of its income tax expense is:

-$210,000.

-$204,750.

-$194,250.

-$189,000.

Q3. Weaver Company had a net deferred tax liability of $34,000 at the beginning of the year, representing a net taxable temporary difference of $100,000 (taxed at 34 percent). During the year, Weaver reported pretax book income of $400,000. Included in the computation were unfavorable temporary differences of $50,000 and favorable temporary differences of $20,000. At the beginning of the year, Congress reduced the corporate tax rate to 21 percent. Weaver's deferred income tax expense or benefit for the current year would be:

-Net deferred tax benefit of $6,300.

-Net deferred tax expense of $6,300.

-Net deferred tax benefit of $19,300.

-Net deferred tax expense of $19,300.