Exam 6: Accounting for Income Taxes

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:

Identify the following items as creating a temporary difference, permanent difference, or no difference.

Grand River Corporation reported pretax book income of $500,000. Included in the computation were favorable temporary differences of $100,000, unfavorable temporary differences of $10,000, and favorable permanent differences of $80,000. The corporation's current income tax expense or benefit would be:

Davison Company determined that the book basis of its net accounts receivable was less than the tax basis of its net accounts receivable by $800,000 due to a difference in the allowance for bad debts account. This basis difference is characterized as:

B-Line Company reported pretax net income from continuing operations of $1,000,000 and taxable income of $800,000. The favorable book-tax difference of $200,000 was due to a $100,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $50,000 due to accrued vacation pay, and a $150,000 favorable permanent difference from the dividends received deduction. a. Compute B-Line's current income tax expense. b. Compute B-Line's deferred income tax expense or benefit. c. Compute B-Line's effective tax rate. d. Provide a reconciliation of B-Line's effective tax rate with its hypothetical tax rate of 21 percent.

Robinson 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, Robinson reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000 and unfavorable temporary differences of $20,000. During the year, Congress reduced the corporate tax rate to 21 percent. Robinson's deferred income tax expense or benefit for the current year would be:

Bruin Company received a $100,000 insurance payment on the death of its company president. The company annually paid $1,000 of nondeductible insurance premiums on the policy. Bruin reported the insurance receipt as income and deducted the premium payments on its books. For ASC 740 purposes, the income and deduction are characterized as:

Yellow Rose Corporation reported pretax book income of $100,000,000. Tax depreciation exceeded book depreciation by $100,000. During the year Yellow Rose capitalized $50,000 into ending inventory under §263A. Capitalized inventory costs of $75,000 in beginning inventory were deducted as part of cost of goods sold on the tax return. Compute Yellow Rose's taxes payable or refundable.

Which of the following statements concerning the classification of deferred tax assets and liabilities is true?

Jones Company reported pretax book income of $409,000. Included in the computation were favorable temporary differences of $50,900, unfavorable temporary differences of $20,450, and favorable permanent differences of $40,450. Book equivalent of taxable income is:

Which of the following statements is true?

Which of the following statements is true?

Which of the following items is not a reconciling item in the income tax footnote?

Lynch Company had a net deferred tax asset of $69,292 at the beginning of the year, representing a net taxable deductible difference of $203,800 (taxed at 34 percent). During the year, Lynch reported pretax book income of $815,200. Included in the computation were favorable temporary differences of $23,800 and unfavorable temporary differences of $51,900.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:

ASC 740 requires a publicly traded company to disclose the components of its deferred tax assets and liabilities only if the amounts are considered to be:

Costello Corporation reported pretax book income of $500,600. During the current year, the reserve for bad debts increased by $6,200. In addition, tax depreciation exceeded book depreciation by $40,600. Finally, Costello received $3,300 of tax-exempt life insurance proceeds from the death of one of its officers. Costello's deferred income tax expense or benefit would be:

Swordfish Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $25,000. In addition, book depreciation exceeded tax depreciation by $100,000. In prior years, tax depreciation exceeded book depreciation by a cumulative amount of $500,000. Finally, Swordfish subtracted a dividends received deduction of $15,000 in computing its current-year taxable income. Swordfish's deferred income tax expense or benefit would be:

Morgan Corporation determined that $2,000,000 of the research credit on its current-year tax return was uncertain, but that it was more likely than not to be sustained on audit. Management made the following assessment of the company's potential tax benefit from the credit and its probability of occurring. Under ASC 740, what amount of the tax benefit related to theresearch credit can Morgan recognize in calculating its income tax provision in the current year?

Costello Corporation reported pretax book income of $500,000. During the current year, the reserve for bad debts increased by $5,000. In addition, tax depreciation exceeded book depreciation by $40,000. Finally, Costello received $3,000 of tax-exempt life insurance proceeds from the death of one of its officers. Costello's deferred income tax expense or benefit would be:

Sparrow Corporation reported pretax book income of $5,000,000. During the current year, the reserve for warranties increased by $300,000. In addition, tax depreciation exceeded book depreciation by $400,000. Finally, Sparrow received $50,000 of tax-exempt interest from municipal bonds. Compute Sparrow's current income tax expense or benefit.