Question 1

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 effect Plaxo's income taxes in 2011.

Accepted Answer

The answer of Plaxo Corporation has a tax rate of...

Question 2

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 _____________________________________________.

Accepted Answer

The answer of Items,such as interest revenue on municipal bond...

Question 3

When recognizing deferred tax assets and liabilities,the income statement approach and the balance sheet approach yield identical results

Accepted Answer

A)  when enacted tax rates applicable to future periods do not change. 
B)  when the firm recognizes no valuation allowance on deferred tax assets. 
C)  Both (a)and (b)are correct. 
D)  None of these answers is correct.

Question 4

Balance Sheet Equation
  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 ____________________________________________________________.

Accepted Answer

The answer of Balance Sheet Equation
  Refer to Balance...

Question 5

At origination which of the following temporary differences would create a deferred tax asset?

Accepted Answer

A)  Tax basis of an asset exceeds its financial reporting basis. 
B)  Tax basis of a liability exceeds its financial reporting basis. 
C)  Financial reporting basis of an asset is equal to its tax basis. 
D)  Financial reporting basis of an asset exceeds its tax basis.

Question 6

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?

Accepted Answer

A)  Level 1. 
B)  Level 2. 
C)  Level 3. 
D)  None of these.

Question 7

When income tax expense differs from income taxes currently payable on taxable income companies recognize deferred tax assets and deferred tax liabilities.What type of event would create a deferred tax asset and deferred tax liability?

Accepted Answer

The answer of When income tax expense differs from income...

Question 8

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?

Accepted Answer

A)  Level 1. 
B)  Level 2. 
C)  Level 3. 
D)  None of these.

Question 9

________________________________________ is the net amount that a firm would receive if it sold an asset or the net amount it would have to pay to settle a liability.

Accepted Answer

The answer of ________________________________________ is the net amount that a...

Question 10

For some transactions GAAP requires that value changes are recognized on the balance sheet and the income statement when they occur,even if not realized.Discuss what types of transactions get this type of treatment and the logic behind this accounting.

Accepted Answer

The answer of For some transactions GAAP requires that value...

Question 11

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

Accepted Answer

The answer of Balance Sheet Equation
  Refer to Balance...

Question 12

Fellsmere Company's income tax return shows income taxes for 2010 of $35,000.The firm reports deferred tax assets before any valuation allowance of $32,600 at the beginning of 2010 and $35,200 at the end of 2010.It reports deferred tax liabilities of $26,900 at the beginning of 2010 and $24,300 at the end of 2010.
Required:
a.Assume for this part that the valuation allowance on the deferred tax assets totaled
$14,400 at the beginning of 2010 and $15,100 at the end of 2010.Compute the amount
of income tax expense for 2010.
b.Assume for this part that the valuation allowance on the deferred tax assets totaled
$14,400 at the beginning of 2010 and $12,700 at the end of 2010.Compute the amount
of income tax expense for 2010.

Accepted Answer

The answer of Fellsmere Company's income tax return shows income...

Question 13

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

Accepted Answer

The answer of What valuation methods reflect current values? Discuss...

Question 14

Approximately what percentage of assets reported under fair value by S&P 500 companies currently incorporate Level 3 inputs for fair value estimation?

Accepted Answer

A)  1% 
B)  10% 
C)  50% 
D)  90%

Question 15

Acquisition costs includes all costs necessary to get an asset ready for its _________________________.

Accepted Answer

The answer of Acquisition costs includes all costs necessary to...

Question 16

Permanent tax differences are revenues and expenses

Accepted Answer

A)  that firms include in income tax returns, but do not appear in the income statement. 
B)  that are included in both the tax return and income statement, but in different accounting periods. 
C)  that firms include in the income statement, but do not appear in income tax returns. 
D)  that are not included in either the tax return or the income statement.

Question 17

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.

Accepted Answer

The answer of Deferred tax assets and liabilities are created...

Question 18

What level are inputs for estimating fair values are based on inputs that are readily available via prices for identical assets or liabilities in actively traded markets such as securities exchanges?

Accepted Answer

A)  Level 1. 
B)  Level 2. 
C)  Level 3. 
D)  None of these.

Question 19

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

Accepted Answer

A)  historical accounting models. 
B)  current value accounting models. 
C)  acquisition cost accounting models. 
D)  mixed attribute accounting models.

Question 20

Future tax deductions

Accepted Answer

A)  result in deferred tax assets. 
B)  result in deferred tax liabilities. 
C)  occur where the tax basis of liabilities is more than the financial reporting basis. 
D)  occur where the tax basis of assets is less than financial reporting basis.

Exam 2: Asset and Liability Valuation and Income Measurement

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 _____________________________________________.

When recognizing deferred tax assets and liabilities,the income statement approach and the balance sheet approach yield identical results

At origination which of the following temporary differences would create a deferred tax asset?

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?

When income tax expense differs from income taxes currently payable on taxable income companies recognize deferred tax assets and deferred tax liabilities.What type of event would create a deferred tax asset and deferred tax liability?

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?

________________________________________ is the net amount that a firm would receive if it sold an asset or the net amount it would have to pay to settle a liability.

For some transactions GAAP requires that value changes are recognized on the balance sheet and the income statement when they occur,even if not realized.Discuss what types of transactions get this type of treatment and the logic behind this accounting.

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

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

Approximately what percentage of assets reported under fair value by S&P 500 companies currently incorporate Level 3 inputs for fair value estimation?

Acquisition costs includes all costs necessary to get an asset ready for its _________________________.

Permanent tax differences are revenues and expenses

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.

What level are inputs for estimating fair values are based on inputs that are readily available via prices for identical assets or liabilities in actively traded markets such as securities exchanges?

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

Future tax deductions