Question 1

37. ABC Co. in its first year of business has taxable income of $2,000, book depreciation of $3,000 and CCA of $4,600, and recognized $800 of warranty expense but performed no warranty service. ABC's pre-tax accounting income would be:  A. $1,200 B. $2,000 C. $2,800 D. $3,600

Accepted Answer

a

Question 2

38. On January 1, Year 2, GHI Inc. had depreciable assets with a book value of $920,000 and a historical cost of $1,000,000. CCA totalling $100,000 had been taken on these assets. During Year 2, depreciation of $80,000 and CCA of $20,000 had been taken on these assets. The tax rate in effect is 35%. For Year 2, the temporary differences arising from the above would result in:  A. a decrease to income tax expense of $21,000. B. an increase to income tax expense of $7,000. C. a decrease to income tax expense of $7,000. D. a decrease to income tax expense of $14,000.

Accepted Answer

a

Question 3

39. Company A had depreciation of $14,000 and CCA of $12,500 during its first year of operations. The tax rates for Years 1 and 2 were 25% and 20% respectively. The Year 2 tax rate was enacted in Year 1. At the end of year 1, this will result in:  A. a deferred income tax asset of $300. B. a deferred income tax liability of $300. C. a deferred income tax asset of $375. D. a deferred income tax liability of $375.

Accepted Answer

a

Question 4

40. Company A had depreciation of $14,000 and CCA of $12,500 during its first year of operations. The tax rates for Years 1 and 2 were 25% and 20% respectively. The Year 2 tax rate was enacted in Year 2. At the end of year 1, this will result in:  A. a deferred income tax asset of $300. B. a deferred income tax liability of $300. C. a deferred income tax asset of $375. D. a deferred income tax liability of $375.

Accepted Answer

c

Question 5

41. The general terminology used to describe income tax expense when shown on the statement of comprehensive income is:  A. Income tax expense B. Income tax benefit C. Provision for income tax expense D. Tax expense

Accepted Answer

c

Question 6

42. A taxable amount is exemplified by:  A. Revenue that is included in the tax return before it is included in pre-tax accounting income. B. Gain that is included in the tax return before it is included in pre-tax accounting income. C. Expense that is included in the tax return after it is included in pre-tax accounting income. D. Expense that is included in the tax return before it is included in pre-tax accounting income.

Accepted Answer

a

Question 7

43. A deductible amount is exemplified by all of the following except:  A. Revenue that is included in the tax return before it is included in pre-tax accounting income. B. Gain that is included in the tax return before it is included in pre-tax accounting income. C. Expense that is included in the tax return after it is included in pre-tax accounting income. D. Loss that is included in the tax return after it is included in pre-tax accounting income. E. Expense that is included in the tax return before it is included in pre-tax accounting income.

Accepted Answer

c

Question 8

``` 44. Golf dues paid for by a company are:   A. a temporary difference  B. a timing difference  C. a permanent difference  D. a reversing difference ```

Accepted Answer

c

Question 9

45. At the end of 2014, the only expected future temporary difference is implied by the following account found in the balance sheet. Prepaid rent ..........$22,000 The footnotes reveal that the prepaid rent applies only to 2015. You would also expect to find which of the following in the balance sheet:  A. Current deferred tax liability B. Current deferred tax asset C. Noncurrent deferred tax liability D. Noncurrent deferred tax asset

Accepted Answer

b

Question 10

46. At most, how many deferred tax accounts will a firm report in its balance sheet?  A. 1 B. 2 C. 3 D. 4

Accepted Answer

d

Question 11

47. Which of the following would result in a deferred tax asset?  A. Using straight-line depreciation for the books and accelerated depreciation for tax. B. Rent received in advance. C. Warranty provision. D. Point of sale revenue recognition for the books, and cost recovery method of revenue recognition for tax.

Accepted Answer

b

Question 12

48. During 2013, MJB has pre-tax accounting income of $8,400. There were no permanent differences. MJB's only temporary difference for 2013 was rent revenue collected in advance of $2,400. None of this amount is recognized for book purposes. MJB's taxable income for 2013 would be:  A. $6,000 B. $8,400 C. $9,600 D. $10,800

Accepted Answer

d

Question 13

49. MNO's taxable income was $900 during 2013. MNO had product warranty costs of $360 recognizable for tax purposes and $400 recognizable for financial accounting purposes. MNO had no other temporary differences. MNO's pre-tax accounting income for 2013 would be:  A. $860 B. $900 C. $940 D. $1,260

Accepted Answer

a

Question 14

see 50 Chapter 16

Accepted Answer

c

Question 15

see 51 Chapter 16

Accepted Answer

b

Question 16

52. A firm reported the following in its income statement for the current year: depreciation expense, $4,000; pollution violation fine, $12,000; pre-tax accounting income, $10,000. The tax rate is 40%. For tax purposes, the CCA deduction was $9,000. What amount of CURRENT income tax expense will be recognized for this year?  A. $7,800 B. $4,000 C. $6,800 D. $400 E. $8,800

Accepted Answer

c

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Chapter 16 MC Flashcards

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