Exam 2: Asset and Liability Valuation and Income Recognition

What valuation methods reflect current values? Discuss the advantage(s)and disadvantage(s)of valuing assets and liabilities using current values.

Jurgen Company's income tax return shows income taxes for 2010 of $75,000 (that is,$75,000 is owed for 2010).For financial reporting,the firm reports deferred tax assets of $67,900 at the beginning of 2010 and $63,600 at the end of 2010.It reports deferred tax liabilities of $53,600 at the beginning of 2010 and $59,400 at the end of 2010. Required: a.Compute the amount of income tax expense for 2010. b.Assume for this part that the firm's deferred tax assets are as stated above for 2010 but that its deferred tax liabilities were $83,500 at the beginning of 2010 and $72,100 at the end of 2010.Compute the amount of income tax expense for 2010. c.Explain contextually why income tax expense is higher than taxes owed in Part a and lower than taxes owed in Part b.

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

Interest on Municipal Bonds represents what kind of tax difference?

Items,such as interest revenue on municipal bond holdings,that do not affect taxable income or income taxes paid in any year are referred to as _____________________________________________.

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?

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 its equipment using the following schedule: year 1- 50%,year 2 - 30%,year 3 - 15% and year 4 - 5%.In 2014 Plaxo purchases a piece of equipment with a four year life and an original cost of $100,000.What amount will Plaxo record as a deferred tax asset or liability in 2010?

a.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. b.Assuming that Plaxo Corporation decides to use accelerated depreciation for both financial and tax reporting purposes for 2011,would there still be a deferred tax liability?

Which of the following would not represent an acquisition cost to be added to the purchase price of building:

The analytical framework used to evaluate transactions is reproduced below: Cash + Non-Cash = Liabilities + Contributed + Accumulated Other + Retained Assets Capital Comprehensive Earnings Income 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%.

What level are inputs for estimating fair values are those inputs include quoted prices for similar assets or liabilities in active or inactive markets,other observable information such as yield curves and price indexes,and other observable data such as market-based correlation estimates?

Accord Inc.income tax return shows taxes currently payable for 2011 of $85,000.The company reported deferred tax assets of $35,000 at the end of 2010 and $24,000 at the end of 2011.Accord reported deferred tax liabilities of $48,000 at the end of 2011 and $54,000 at the end of 2011. Determine the amount of income tax expense reported by Accord for 2011.

The difference between income tax payable and income tax expense is reported on the balance sheet as either a(n)______________________________ or a(n)_______________________________.

A change in the _________________________ or _________________________ will not change a preset series of cash flows,however it will change the present value of those cash flows.

The net amount a firm would receive if it sold an asset or the net amount it would pay to settle a liability is referred to as:

Disregarding cash flows with owners,over sufficiently long periods of time,net income equals:

Historical costs include all of the following except:

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 private equity funds invested in a young,privately-held start-up company,which of the following would he/she most likely identify as the level of inputs to determine this?