AC 302 Week 3 Quiz 100% Correct

AC 302 Week 3 Quiz 100% Correct
Question 1	Question 	Stephens Company has a deductible temporary difference of $2,000,000 at the end of its first year of operations. Its tax rate is 40 percent. Stephens has $1,800,000 of income taxes payable. At the end of the first year, after a careful review of all available evidence, Stephens determines that it is probable that it will not realize $200,000 of this deferred tax asset. At the end of the second year of operations, Stephens Company determines that it expects to realize $1,850,000 of this deferred tax assets. On Stephens Company- income statement for the second year, what amount of income tax expense will it report related to the temporary difference, and is the amount a debit or credit?


Question 2.	Question :	Mitchell Corporation prepared the following reconciliation for its first year of operations:
Pretax financial income for 2011 	                                                 $ 900,000 
Tax exempt interest 	                                                     (75,000) 
Originating temporary difference 	                                                   (225,000) 
Taxable income 	                                                   $600,000 

 
The temporary difference will reverse evenly over the next two years at an enacted tax rate of 40%. The enacted tax rate for 2011 is 35%.
In Mitchell- 2011 income statement, what amount should be reported for total income tax expense?



Question 3.	Question :	Accounting for income taxes can result in the reporting of deferred taxes as any of the following except


Question 4.	Question :	Larsen Corporation reported $100,000 in revenues in its 2014 financial statements, of which $33,000 will not be included in the tax return until 2015. The enacted tax rate is 40% for 2014 and 35% for 2015. What amount should Larsen report for deferred income tax liability in its balance sheet at December 31, 2014?

Question 5.	Question :	Cross Company reported the following results for the year ended December 31, 2014, its first year of operations:
                                                                                                    2014      
Income (per books before income taxes)                                $   1,500,000
Taxable income                                                                        2,400,000

The disparity between book income and taxable income is attributable to a temporary difference which will reverse in 2015. What should Cross record as a net deferred tax asset or liability for the year ended December 31, 2014, assuming that the enacted tax rates in effect are 40% in 2014 and 35% in 2015?