ACCT 557 WEEK 2 QUIZ

ACCT 557 WEEK 2 
Question 5.
Question 
(TCO B) In its first four years of operations ending December 31, Year 4, Alder, Inc.'s depreciation for income tax purposes exceeded its depreciation for financial statement purposes.  This temporary difference was expected to reverse in Year 5, Year 6, and Year 7.  Alder had no other temporary difference.  Under U.S. GAAP, Alder's Year 4 balance sheet should include:
Question 4.
Question :
(TCO B) For the year ended December 31, 1993, Grim Co.'s pretax financial statement income was $200,000 and its taxable income was $150,000.  The difference is due to the following:
 
Interest on municipal bonds                           $70,000
Premium expense on keyman life insurance  (20,000)
Total                                                               $50,000
 
Grim's enacted income tax rate is 30%.  In its 1993 income statement, what amount should Grim report as current provision for income tax expense?
Question 3.
Question :
(TCO B) Orleans Co., a cash basis taxpayer, prepares accrual basis financial statements.  In its Year 2 balance sheet, Orleans' deferred income tax liabilities increased compared to Year 1.  Which of the following changes would cause this increase in deferred income tax liabilities?
I.    An increase in prepaid insurance.
II.  An increase in rent receivable.
III. An increase in warranty obligations.
Question 2.
Question :
(TCO B)  Mobe Co. reported the following operating income (loss) for its first three years of operations:
Year 1    $       300,000
Year 2             (700,000)
Year 3             1,200,000
 
For each year, there were no deferred income taxes (before Year 1), and Mobe's effective income tax rate was 30%.  In its Year 2 income tax return, Mobe elected the two year carry back of the loss.  In its Year 3 income statement, what amount should Mobe report as total income tax expense?
Question 1.
Question :
(TCO B) Zeff Co. prepared the following reconciliation of its pretax financial statement income to taxable income for the year ended December 31, Year 1, its first year of operations:
 
Pretax financial income                                                  $160,000
Nontaxable interest received on municipal securities         (5,000)
Long-term loss accrual in excess of deductible amount    10,000
Depreciation in excess of financial statement amount     (25,000)
Taxable income                                                              $140,000
 
Zeff's tax rate for Year 1 is 40%.
In its December 31, Year 1, balance sheet, what should Zeff report as deferred income tax liability?