Reference no: EM132764361
Questions -
Q1) Brass Co. reported income before income tax expense of $60,000 in the current year. Brass had no permanent or temporary differences for tax purposes. Brass has an effective tax rate of 30% and a $40,000 net operating loss carryforward from 2018. What is the maximum income tax benefit that Brass can realize from the loss carry forward?
A. $9,600
B. $12,000
C. $32,000
D. $40,000
Q2) Miro Co. began business on January 2, year 1. Miro used the double-declining balance method of depreciation for financial statement purposes for its building, and the straight-line method for income taxes. On January 16, year 3, Miro elected to switch to the straight-line method for both financial statement and tax purposes. The building cost $240,000 in year 1, which has an estimated useful life of 15 years and no salvage value. Data related to the build is as follows:
Year | Double-declining balance depreciation | Straight-line depreciation
year 1 $30,000 $16,000
year 2 $20,000 $16,000
Miro's tax rate is 40%.
Which of the following statements is correct?
A. There should be no reduction in Miro's deferred tax liabilities or deferred tax assets in year 3.
B. Miro's deferred tax liability or asset should be eliminated in year 3.
C. Miro's deferred tax asset should be reduced by $554 in year 3.
D. Miro's deferred tax liability should be reduced by $554 in year 3
Q3) For the year ended December 31, year 4, Grim Co.'s pretax financial statement income was $200,000 and its taxable income was $150,000. The difference is due to the following:
Interest on municipal bonds $70,000
Premium expense on key manager life insurance ($20,000)
Total $50,000
Grim's enacted income tax rate is 30%. In its year 4 income statement, what amount should Grim report as current provision for income tax expense?
A. $45,000
B. $51,000
C. $60,000
D. $66,000
Q4) Lake Corp., a newly organized company, reported pretax financial income of $100,000 for year 1. Among the items reported in Lake's year 1 income statement are the following:
Premium on officer's life insurance with Lake as owner and beneficiary of $15,000
Interest received on municipal bonds of $ 20,000
The enacted tax rate for year 1 is 30% and 25% thereafter. In its December 31, year 1, balance sheet, Lake should report a deferred income tax liability of
A. $28,500
B. $4,500
C. $3,750
D. $0
Q5) Kasar Co. has net income, before taxes, of $335,000, including $35,000 in interest revenue from municipal bonds and $12,000 paid for officers' life insurance premiums where the company is the beneficiary. The effective tax rate for the current year is 29.5%. What is Kasar's actual tax rate for the current year?
A. 29.5%
B. 30.0%
C. 31.0%
D. 31.7%