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Homework answers / question archive / Bakersfield College ACG 2021 1)What would Kents income tax expense be in the year 2016? a

Bakersfield College ACG 2021 1)What would Kents income tax expense be in the year 2016? a

Accounting

Bakersfield College

ACG 2021

1)What would Kents income tax expense be in the year 2016?

a.              $42,300.

b.     $45,900.

c.     $49,500.

d.     None of these answer choices are correct.

 

 

 

 

  1. Of the following temporary differences, which one ordinarily creates a deferred tax asset?
    1. Completed-contract method for long-term construction contracts for tax reporting.
    2. Installment sales for tax reporting.
    3. Accrued warranty expense.
    4. Accelerated depreciation for tax reporting.

 

 

 

  1. Using straight-line depreciation for financial reporting purposes and MACRS for tax purposes in the first year of an asset’s life creates a:
    1. Future deductible amount.
    2. Permanent difference not requiring inter-period tax allocation.
    3. Deferred tax asset.
    4. Deferred tax liability.

 

 

 

 

  1. A deferred tax asset represents a:
    1. Future income tax benefit.
    2. Future cash collection.
    3. Future tax refund.
    4. Future amount of money to be paid out.

 

 

 

 

  1. Of the following temporary differences, which one ordinarily creates a deferred tax asset?
    1. Intangible drilling costs.
    2. MACRS depreciation.
    3. Rent received in advance.
    4. Installment sales.

 

 

 

 

  1. Which of the following differences between financial accounting and tax accounting ordinarily creates a deferred tax asset?
    1. Tax depreciation in excess of book depreciation.
    2. Revenue collected in advance
    3. The installment sales method for tax purposes.
    4. None of these answer choices are correct.

 

 

 

 

  1. Which of the following creates a deferred tax asset?
    1. An unrealized loss from recording investments at fair value.
    2. Prepaid insurance.
    3. An unrealized gain from recording investments at fair value.
    4. Accelerated depreciation in the tax return.

 

 

 

 

  1. Which of the following circumstances creates a future deductible amount?
    1. Earning of non-taxable interest on municipal bonds.
    2. Sales of property (installment method for tax purposes).
    3. Prepaid advertising expense.
    4. Accrued warranty expenses.

 

 

 

  1. Estimated employee compensation expenses earned during the current period but expected to be paid in the next period causes:
    1. An increase in a deferred tax asset.
    2. A decrease in a deferred tax asset.
    3. An increase in a deferred tax liability.
    4. A decrease in a deferred tax liability.

 

 

  1. A magazine publisher collects one year in advance for subscription revenue. In the year of providing the magazines to customers, the company would record:
    1. An increase in a deferred tax asset.
    2. A decrease in a deferred tax asset.
    3. An increase in a deferred tax liability.
    4. A decrease in a deferred tax liability.

 

 

 

  1. In 2016, Magic Table Inc. decides to add a 36-month warranty on its new product sales. Warranty costs are tax deductible when claims are settled. In its financial statements for 2016, Magic Table Inc incurs:
    1. An increase in a deferred tax asset.
    2. A decrease in a deferred tax asset.
    3. An increase in a deferred tax liability.
    4. A decrease in a deferred tax liability.

 

 

 

  1. Which of the following usually results in an increase in a deferred tax asset?
    1. Accelerated depreciation for tax reporting and straight-line depreciation for financial reporting.
    2. Prepaid insurance.
    3. Subscriptions delivered for which customers had paid in advance.
    4. None of these answer choices are correct.

 

 

 

  1. At the end of the current year, Newsmax Inc. has $400,000 of subscriptions received in advance included in its balance sheet. A disclosure note reveals that the entire $400,000 will be earned in

 

the next year. In the absence of other temporary differences, in the balance sheet one would also expect to find a:

    1. Noncurrent deferred tax liability.
    2. Noncurrent deferred tax asset.
    3. Current deferred tax liability.
    4. Current deferred tax asset.

 

 

 

 

  1. The valuation allowance account that is used in conjunction with deferred tax assets is a(n):
    1. Liability.
    2. Component of shareholders’ equity.
    3. Asset.
    4. Contra asset.

 

 

 

 

  1. The valuation allowance account that is used in conjunction with deferred taxes relates:
    1. Only to deferred tax liabilities.
    2. To both deferred tax assets and liabilities.
    3. Only to deferred tax assets.
    4. Only to income taxes receivable due to net operating loss carrybacks.

 

 

 

 

  1. In 2015, HD had reported a deferred tax asset of $90 million with no valuation allowance. At December 31, 2016, the account balances of HD Services showed a deferred tax asset of $120 million before assessing the need for a valuation allowance and income taxes payable of $80

 

million. HD determined that it was more likely than not that 30% of the deferred tax asset ultimately would not be realized. HD made no estimated tax payments during 2016. What amount should HD report as income tax expense in its 2016 income statement?

    1. $50 million.
    2. $80 million.
    3. $86 million.
    4. $116 million.

 

 

 

 

  1. For classification purposes, a valuation allowance:
    1. Is allocated proportionately between deferred tax assets and deferred tax liabilities.
    2. Is allocated proportionately between the current and noncurrent portions of the deferred tax asset.
    3. Is allocated proportionately between the current and noncurrent portions of the deferred tax liability.
    4. Is added to the deferred tax asset.

 

 

 

 

  1. If a company's deferred tax asset is not reduced by a valuation allowance, the company believes it is:
    1. Probable that sufficient taxable income will be generated in future years to realize the full tax benefit.
    2. Probable that sufficient financial income will be generated in future years to realize the full tax benefit.
    3. More likely than not that sufficient taxable income will be generated in future years to realize the full tax benefit.
    4. More likely than not that sufficient financial income will be generated in future years to realize the full tax benefit.

 

 

 

 

  1. Which of the following causes a permanent difference between taxable income and pretax accounting income?
    1. The installment method used for sales of property.
    2. MACRS depreciation method used for equipment.
    3. Interest income on municipal bonds.
    4. Percentage-of-completion method for long-term construction contracts.

 

 

 

  1. In reconciling net income to taxable income, interest earned on municipal bonds is:
    1. Ignored.
    2. A temporary difference.
    3. A reversing difference.
    4. A permanent difference.

 

 

 

 

  1. Which of the following causes a permanent difference between taxable income and pretax accounting income?
    1. Advance collections of revenues.
    2. MACRS depreciation method used for equipment.
    3. The installment method used for sales of merchandise.
    4. Interest earned on municipal securities.

 

 

 

 

  1. Which of the following would never require reporting deferred tax assets or deferred tax liabilities?
    1. Depreciation on equipment.
    2. Accrual of warranty expense.
    3. Life insurance premiums for the payer’s benefit.
    4. Rent revenue received in advance.

 

 

 

  1. When tax rates are changed subsequent to the creation of a deferred tax asset or liability, GAAP requires that:
    1. All deferred tax accounts be adjusted to reflect the new tax rates.
    2. The beginning deferred tax accounts are left unchanged.
    3. Only the current deferred tax accounts are adjusted to reflect the new tax rates.
    4. Only the noncurrent deferred tax accounts are adjusted to reflect the new tax rates.

 

 

 

 

 

  1. Pretax accounting income for the year ended December 31, 2016, was $50 million for Truffles Company. Truffles’ taxable income was $60 million. This was a result of differences between straight-line depreciation for financial reporting purposes and MACRS for tax purposes. The enacted tax rate is 30% for 2016 and 40% thereafter. What amount should Truffles report as the current portion of income tax expense for 2016?
    1. $15 million.
    2. $18 million.
    3. $20 million.
    4. $24 million.

 

 

 

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