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Exam 6: Accounting for Income Taxes

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Question 31

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Yellow Rose Corporation reported pretax book income of $100,000,000. Tax depreciation exceeded book depreciation by $100,000. During the year Yellow Rose capitalized $50,000 into ending inventory under §263A. Capitalized inventory costs of $75,000 in beginning inventory were deducted as part of cost of goods sold on the tax return. Compute Yellow Rose's taxes payable or refundable.

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$20,973,75...

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Question 32

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Which of the following statements about uncertain tax position disclosures is False?

A) ASC 740 requires a company to disclose the amount of unrecognized tax benefits for each country in which it files a tax return.
B) ASC 740 requires a company to disclose the aggregate amount of unrecognized tax benefits, separated between U.S., state and local, and international tax positions.
C) ASC 740 requires a company to disclose the aggregate amount of unrecognized tax benefits without separation between U.S., state and local, and international tax positions.
D) None of the choices are correct.

E) None of the above
F) A) and D)

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Question 33

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Marlin Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $25,000. In addition, book depreciation exceeded tax depreciation by $100,000. Finally, Marlin subtracted a dividends received deduction of $15,000 in computing its current year taxable income. Marlin's current income tax expense or benefit would be:

Which of the following best describes the focus of ASC 740?

Entities classify all deferred tax assets and liabilities as current on the balance sheet.

Davison Company determined that the book basis of its net accounts receivable was less than the tax basis of its net accounts receivable by $800,000 due to a difference in the allowance for bad debts account. This basis difference is characterized as:

Which of the following statements is True?

The tax effects of permanent differences generally are reported in a company's computation of its effective tax rate.

Bruin Company received a $100,000 insurance payment on the death of its company president. The company annually paid $1,000 of non-deductible insurance premiums on the policy. Bruin reported the insurance receipt as income and deducted the premium payments on its books. For ASC 740 purposes, the income and deduction are characterized as:

Angel Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $25,000. In addition, tax depreciation exceeded book depreciation by $100,000. Finally, Angel subtracted a dividends received deduction of $25,000 in computing its current year taxable income. Angel's hypothetical tax expense in its reconciliation of its income tax expense is:

Which of the following items is NOT a reconciling item in the income tax footnote?

Once determined, an unrecognized tax benefit under ASC 740 is not readjusted for subsequent events.

Which of the following statements best describes the ASC 740 process for evaluating a company's uncertain tax positions?

Costello Corporation reported pretax book income of $500,000. During the current year, the reserve for bad debts increased by $5,000. In addition, tax depreciation exceeded book depreciation by $40,000. Finally, Costello received $3,000 of tax-exempt life insurance proceeds from the death of one of its officers. Costello's deferred income tax expense or benefit would be:

Which of the following statements is True?

Lynch Company had a net deferred tax asset of $68,000 at the beginning of the year, representing a net taxable temporary difference of $200,000 (taxed at 34%) . During the year, Lynch reported pretax book income of $800,000. Included in the computation were favorable temporary differences of $20,000 and unfavorable temporary differences of $50,000. At the beginning of the year, Congress reduced the corporate tax rate to 21%. Lynch's deferred income tax expense or benefit for the current year would be:

For 2018, Manchester Corporation recorded the following deferred tax assets and liabilities: The current deferred tax accounts and the noncurrent deferred tax liabilities result from temporary differences that relate to the company's U.S. operations. The noncurrent deferred tax asset relates to the company's German operations. Manchester wants to minimize the number of deferred tax accounts it reports on the balance sheet. What is the minimum number of deferred tax accounts Manchester can report on its balance sheet and what are the names and dollar amounts in each account?

Gull Corporation reported pretax book income of $2,000,000. Included in the computation were favorable temporary differences of $300,000, unfavorable temporary differences of $200,000, and favorable permanent differences of $50,000. Compute Gull's current income tax expense or benefit. Note: New Corporate income tax rate has been mentioned as "21% on all taxable income" as per the recent change.

Which of the following statements best describes the disclosure of a company's deferred tax assets and liabilities?

In 2018, Moody Corporation recorded the following deferred tax assets and liabilities: All of the deferred tax accounts relate to temporary differences that result from the company's U.S. operations. Moody wants to minimize the number of deferred tax accounts it reports on the balance sheet. What is the minimum number of deferred tax accounts Moody reports on its balance sheet and what are the names and dollar amounts in each account?