02 Jan 9. What did it report on December

ADVANCED ACCOUNTING

CHAPTER 19: ACCOUNTING FOR INCOME TAXES.

1. Which of the following circumstances creates a future taxable amount?
A. Service fees collected in advance from customers: taxable when received, recognized for financial reporting when earned.
B. Accrued compensation costs for future payments.
C. Straight-line depreciation for financial reporting and accelerated depreciation for tax reporting.
D. Investment expenses incurred to obtain tax-exempt income (not tax deductible).

For its first year of operations Univision Corporation’s reconciliation of pretax accounting income to taxable income is as follows:

Pretax Financial Income

$ 480,000

Permanent Difference

(24,000)

456,000

Temporary Difference

(depreciation)

(32,000)

Taxable Income

$ 424,000

Univision’s tax rate is 40%. Assume that no estimated taxes have been paid.

2. What should Univision report as income tax payable for its first year of operations?
A. $192,000.
B. $182,400.
C. $169,600.
D. $12,800.

.

3. What should Univision report at the end of its first year of operations?
A. Deferred Tax Liability: $22,400.
B. Deferred Tax Liability: $12,800.
C. Deferred Tax Asset: $22,400.
D. Deferred Tax Asset: $12,800.

4. What should Univision report as its income tax expense for its first year of operations?
A. $192,000.
B. $182,400.
C. $169,600.
D. $12,800.

Sanyo Inc. began operations in January 2013. For certain of its property sales, Sanyo recognizes income in the period of sale for financial reporting purposes. However, for income tax purposes, Sanyo recognizes income when it collects cash from the buyer’s installment payments.
In 2013, Sanyo had $400,000 in sales of this type. Scheduled collections for these sales are as follows:

2013: $40,000

2014: 80,000

2015: 80,000

2016: 100,000

2017: 100,000

400,000

Assume that Sanyo has a 30% income tax rate and that there were no other differences in income for financial statement and tax purposes.

5. Sanyo Inc. will report in its year-end 2013 balance sheet:

A. Deferred Tax Asset: $12,000.

B. Deferred Tax Asset: $108,000.

C. Deferred Tax Liability: $12,000.

D. Deferred Tax Liability: $108,000.

6. Sanyo Inc. will report in its year-end 2014 balance sheet:

A. Deferred Tax Asset: $84,000.

B. Deferred Tax Asset: $24,000.

C. Deferred Tax Liability: $84,000.

D. Deferred Tax Liability: $24,000.

7. Ecoprix Corp. had taxable income of $18,400 in the current year. The amount of MACRS depreciation was $6,900 while the amount of depreciation reported in the income statement was $2,300. Assuming no other differences between tax and accounting income, Ecoprix’s pretax financial income was:

A. $11,500.
B. $13,800.
C. $23,000.
D. $20,700.

8. For the current year, Centipede Corp. had $80,000 in pretax financial income. This included bad debt expense of $6,000 based on the allowance method, and $20,000 in depreciation expense. $2,000 in receivables were written off as uncollectible, and MACRS depreciation amounted to $35,000. In the absence of other temporary or permanent differences, what was Centipede’s income tax payable currently, assuming a tax rate of 40%?

A. $19,600.

B. $25,200.

C. $27,600.

D. $29,200.

Puritan Corp. reported the following pretax financial income and taxable income for its first three years of operations:

· 2012: $350,000.

· 2013: (600,000).

· 2014: 700,000.

Puritan’s tax rate is 40% for all years. Puritan elected a loss carryback. Puritan was certain it would recover the full tax benefit of the NOL (Net Operating Loss).

9. What did it report on December 31, 2013, as the deferred tax asset for the NOL carryforward?

A. $280,000.
B. $200,000.
C. $100,000.
D. $0.

10. What would be the net loss in 2013 reported in Puritan’s income statement?

A. $360,000.
B. $240,000.
C. $460,000.
D. $500,000.