CHAPTER 19 ACCOUNTING FOR INCOME TAXES

| November 9, 2018

52.
At
the end of 2013, what is the book basis and the tax basis of the asset?

Book basis

Tax basis

a.

$660,000

$465,000

b.

$735,000

$465,000

c.

$735,000

$540,000

d.

$660,000

$540,000

53.
At
the end of 2013, which of the following deferred tax accounts and balances is
reported on Pitman’s balance sheet?

Account

_

Balance

a.

Deferred tax asset

$78,000

b.

Deferred tax liability

$78,000

c.

Deferred tax asset

$117,000

d.

Deferred tax liability

$117,000

54.
Lehman
Corporation purchased a machine on January 2, 2011, for $2,000,000. The machine
has an estimated 5-year life with no salvage value. The straight-line method of
depreciation is being used for financial statement purposes and the following
MACRS amounts will be deducted for tax purposes:

2011

$400,000

2014

$230,000

2012

640,000

2015

230,000

2013

384,000

2016

116,000

Assuming an income tax rate of 30% for all years, the net
deferred tax liability that should be reflected on Lehman’s balance sheet at
December 31, 2012, should be

Deferred Tax Liability

Current

Noncurrent

a.

$0

$72,000

b.

$4,800

$67,200

c.

$67,200

$4,800

d.

$72,000

$0

Use the following information for
questions 55 through 57.

Mathis Co. at the end of 2012, its
first year of operations, prepared a reconciliation between pretax financial
income and taxable income as follows:

Pretax financial income

$

600,000

Estimated litigation expense

1,500,000

Installment sales

(1,200,000)

Taxable income

$

900,000

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19 – 14 Test Bank for Intermediate Accounting,
Fourteenth Edition
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The
estimated litigation expense of $1,500,000 will be deductible in 2014 when it
is expected to be paid. The gross profit from the installment sales will be
realized in the amount of $600,000 in each of the next two years. The estimated
liability for litigation is classified as noncurrent and the installment
accounts receivable are classified as $600,000 current and $600,000 noncurrent.
The income tax rate is 30% for all years.

55.
The
income tax expense is

a.
$180,000.

b.
$270,000.

c.
$300,000.

d.
$600,000.

56.
The
deferred tax asset to be recognized is

a.
$0.

b.
$90,000
current.
c.
$450,000
current.
d.
$450,000
noncurrent.

57.
The
deferred tax liability—current to be recognized is

a.
$90,000.

b.
$270,000.

c.
$180,000.

d.
$360,000.

Use the following information for
questions 58 through 60.

Hopkins Co.
at the end of 2012, its first year of operations, prepared a reconciliation
between pretax financial income and taxable income as follows:

Pretax financial income

$

900,000

Estimated litigation expense

1,200,000

Extra depreciation for taxes

(1,800,000)

Taxable income

$

300,000

The
estimated litigation expense of $1,200,000 will be deductible in 2013 when it
is expected to be paid. Use of the depreciable assets will result in taxable
amounts of $600,000 in each of the next three years. The income tax rate is 30%
for all years.

58.
Income
tax payable is

a.
$0.

b.
$90,000.

c.
$180,000.

d.
$270,000.

59.
The
deferred tax asset to be recognized is

a.
$90,000
current.
b.
$180,000
current.
c.
$270,000
current.
d.
$360,000
current.

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Accounting for Income Taxes 19 – 15
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60.
The
deferred tax liability to be recognized is

Current

Noncurrent

a.

$180,000

$360,000

b.

$180,000

$270,000

c.

$0

$540,000

d.

$0

$450,000

61.
Eckert
Corporation’s partial income statement after its first year of operations is as
follows:

Income before income taxes

$3,750,000

Income tax expense

Current

$1,035,000

Deferred

90,000

1,125,000

Net income

$2,625,000

Eckert uses
the straight- line method of depreciation for financial reporting purposes and
accelerated depreciation for tax purposes. The amount charged to depreciation
expense on its books this year was $1,800,000. No other differences existed
between book income and taxable income except for the amount of depreciation.
Assuming a 30% tax rate, what amount was deducted for depreciation on the
corporation’s tax return for the current year?

a.
$1,500,000

b.
$1,125,000

c.
$1,800,000

d.
$2,100,000

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