Reference no: EM133015589
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. Olivia Company deducts insurance expense of 84,000 for tax purposes in 2020, but the expense is not yet recognized for accounting purposes. In 2021, 2022, and 2023, no insurance expense will be deducted for tax purposes, but 28,000 of insurance expense will be reported for accounting purposes in each of these years. Olivia Company has a tax rate of 40% and income taxes payable of 72,000 at the end of 2020. There were no deferred taxes at the beginning of 2020.
1. What is the amount of the deferred tax liability at the end of 2020?
a. 33,600 b. 28,800 c. 12,000 d. 0
2. What is the amount of income tax expense for 2020?
a. 105,600 b. 100,800 c. 84,000 d. 72,000
3. Assuming that income tax payable for 2021 is 96,000, the income tax expense for 2021 would be what amount?
a. 129,600 b. 107,200 c. 96,000 d. 84,800
Q3. 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