Exam 2: Asset and Liability Valuation and Income Recognition

Plaxo Corporation has a tax rate of 35% and uses the straight-line method of depreciation for its equipment, which has a useful life of four years. Tax legislation requires the company to depreciate this type of equipment using the following schedule: year 1 - 50%, year 2 - 30%, year 3 - 15% and year 4 - 5%. In 2011 Plaxo purchases a piece of equipment with a four-year life and an original cost of $100,000. Discuss how this transaction will affect Plaxo's income taxes in 2011.

The income statement approach to measuring income tax expense:

If a portfolio manager had to estimate the fair value of privately placed bond issues, which of the following would he/she most likely identify as the level of inputs to determine this?

Refer to Balance Sheet Equation. ORP Corporation Purchases land for $9,000 cash and 1,000 shares of common stock values at 10 per share. This transaction results in ORP recording a decrease in cash of $9,000, an increase in non-cash assets of $ 19,000, and an increase in ______________________________ of $10,000

Stockholders' equity can be expanded into the following three accounts: Accumulated other comprehensive income, retained earnings and _________________________________________________________________.

Deferred tax assets and liabilities are created due to temporary differences between the tax and financial reporting basis of certain assets and liabilities. Discuss which scenarios result in a deferred tax asset and which result in deferred tax liabilities.

Discuss the three ways in which GAAP allows value changes to be treated in the financial statements. Provide an example of each value change treatment.

Balance Sheet Equation Refer to the Balance Sheet Equation . If ORP Corporation sells $25,000 of its product on account, it will see an increase in non-cash assets and ___________________________________.

Permanent tax differences are revenues and expenses:

The amount initially paid to acquire an asset is called ______________________________.

U.S. GAAP, IFRS, and other major accounting standards are best characterized as:

Present value methods are often used with receivables and liabilities:

The accounting equation is represented by Assets= Liabilities + Stockholders' Equity which of the following would cause a change in the stockholders' equity accounts:

What level are inputs for estimating fair values based on a firm's own assumptions about the fair value of an asset or a liability, such as using various data to estimate present values?

Refer to Balance Sheet Equation. JCP Company purchased marketable securities for $5,000 during the year, at the end of the year the company revalues the securities to $5,700. This revaluation would result in an increase to non-cash assets and ____________________________________________________________.

When income tax expense for a period is greater than income tax payable the difference will be reported how and on which financial statement?

If a portfolio manager had to estimate the fair value of real estate, which of the following would he/she most likely identify as the level of inputs to determine this?

Discuss the two principal reasons income before taxes for financial reporting differs from taxable income.

If a portfolio manager had to estimate the fair value of investments in timber, which of the following would he/she most likely identify as the level of inputs to determine this?

The analytical framework used to evaluate transactions is reproduced below: Using this analytical framework indicate the effect of each of the following transactions for CX Corporation: 1. CX Corporation purchases land for $450,000 cash. 2. At the end of the period CX Corporation receives an appraisal that values the land at $540,000. 3. During the next period CX Corporation sells the land for $665,000. 4. CX pays taxes at a rate of 40%.