CHAPTER 19 ACCOUNTING FOR INCOME TAXES

| November 9, 2018

92.
Nickerson
Corporation began operations in 2011. There have been no permanent or temporary
differences to account for since the inception of the business. The following
data are available:

Year

Enacted Tax Rate

Taxable Income

Taxes
Paid

2011

45%

$1,250,000

$562,500

2012

40%

1,500,000

600,000

2013

35%

2014

30%

In 2013, Nickerson had an operating
loss of $1,550,000. What amount of income tax benefits should be reported on
the 2013 income statement due to this loss?

a.
$682,500

b.
$622,500

c.
$620,000

d.
$465,000

Use the following information for questions 93 and 94.

Operating income and tax rates for
C.J. Company’s first three years of operations were as follows:

Income _

Enacted tax rate

2012

$200,000

35%

2013

($500,000)

30%

2014

$840,000

40%

93. Assuming that C.J. Company opts to
carryback its 2013 NOL, what is the amount of income tax payable at December
31, 2014?

a.
$136,000

b.
$336,000

c.
$246,000

d.
$216,000

94.
Assuming
that C.J. Company opts only to carryforward its 2013 NOL, what is the amount of
deferred tax asset or liability that C.J. Company would report on its December
31, 2013 balance sheet?

Amount _

Deferred tax
asset or liability

a.

$150,000

Deferred tax liability

b.

$175,000

Deferred tax liability

c.

$200,000

Deferred tax asset

d.

$150,000

Deferred tax asset

To download more slides, ebook, solutions and test bank, visit
http://downloadslide.blogspot.com

19 – 24 Test Bank for Intermediate Accounting,
Fourteenth Edition
1clip_image001.gif”>
MULTIPLE CHOICE—CPA Adapted

95.
Munoz
Corp.’s books showed pretax financial income of $1,800,000 for the year ended
December 31, 2013. In the computation of federal income taxes, the following
data were considered:

Gain
on an involuntary conversion

$780,000

(Munoz has elected to replace the
property within the statutory

period using total proceeds.)

Depreciation deducted for tax
purposes in excess of depreciation

deducted for book purposes

120,000

Federal
estimated tax payments, 2013

150,000

Enacted federal tax rate, 2013

30%

What amount should Munoz report as its
current federal income tax liability on its December 31, 2013 balance sheet?

a.
$120,000

b.
$156,000

c.
$270,000

d. $306,000

96. Haag
Corp.’s 2013 income statement showed pretax accounting income of $1,250,000. To
compute the federal income tax liability, the following 2013 data are provided:

Income from exempt municipal bonds

$
50,000

Depreciation deducted for tax
purposes in excess of depreciation

deducted for financial statement purposes

100,000

Estimated federal income tax
payments made

250,000

Enacted corporate income tax rate

30%

What amount of current federal income
tax liability should be included in Hagg’s December 31, 2013 balance sheet?
a.
$
80,000
b.
$110,000

c.
$125,000

d.
$330,000

97.
On
January 1, 2013, Gore, Inc. purchased a machine for $900,000 which will be
depreciated $90,000 per year for financial statement reporting purposes. For
income tax reporting, Gore elected to expense $100,000 and to use straight-line
depreciation which will allow a cost recovery deduction of $80,000 for 2013.
Assume a present and future enacted income tax rate of 30%. What amount should
be added to Gore’s deferred income tax liability for this temporary difference
at December 31, 2013?

a.
$54,000

b.
$30,000

c.
$27,000

d.
$24,000

To download more slides, ebook, solutions and test bank, visit
http://downloadslide.blogspot.com

Accounting for Income Taxes 19 – 25
1clip_image002.gif”>
98.
On
January 1, 2013, Piper Corp. purchased 40% of the voting common stock of Betz,
Inc. and appropriately accounts for its investment by the equity method. During
2013, Betz reported earnings of $540,000 and paid dividends of $180,000. Piper
assumes that all of Betz’s undistributed earnings will be distributed as
dividends in future periods when the enacted tax rate will be 30%. Ignore the
dividend-received deduction. Piper’s current enacted income tax rate is 25%.
The increase in Piper’s deferred income tax liability for this temporary
difference is

a.
$108,000.

b.
$90,000.

c.
$64,800.

d.
$43,200.

99.
Foltz
Corp.’s 2012 income statement had pretax financial income of $250,000 in its
first year of operations. Foltz uses an accelerated cost recovery method on its
tax return and straight-line depreciation for financial reporting. The
differences between the book and tax deductions for depreciation over the
five-year life of the assets acquired in 2012, and the enacted tax rates for
2012 to 2016 are as follows:

Book Over (Under) Tax

Tax
Rates

2012

$(50,000)

35%

2013

(65,000)

30%

2014

(15,000)

30%

2015

60,000

30%

2016

70,000

30%

There
are no other temporary differences. In Foltz’s December 31, 2012 balance sheet,
the noncurrent deferred income tax liability and the income taxes currently
payable should be

Noncurrent Deferred

Income Taxes

Income
Tax Liability

Currently
Payable

a.

$39,000

$50,000

b.

$39,000

$70,000

c.

$15,000

$60,000

d.

$15,000

$70,000

100.
Didde
Corp. prepared the following reconciliation of income per books with income per
tax return for the year ended December 31, 2013:

Book income before income taxes

$1,500,000

Add temporary difference

Construction contract revenue which
will reverse in 2014

160,000

Deduct temporary difference

Depreciation expense which will reverse in equal
amounts in

each of the next four years

(640,000)

Taxable income

$1,020,000

Didde’s effective income tax rate is
34% for 2013. What amount should Didde report in its 2013 income statement as
the current provision for income taxes?
a.
$54,400

b.
$346,800

c.
$510,000

d.
$564,400

To download more slides, ebook, solutions and test bank, visit
http://downloadslide.blogspot.com

19 – 26 Test Bank
for Intermediate Accounting, Fourteenth Edition
1clip_image003.gif”>
101. In
its 2012 income statement, Cohen Corp. reported depreciation of $1,480,000 and
interest revenue on municipal obligations of $280,000. Cohen reported
depreciation of $2,200,000 on its 2012 income tax return. The difference in
depreciation is the only temporary difference, and it will reverse equally over
the next three years. Cohen’s enacted income tax rates are 35% for 2012, 30%
for 2013, and 25% for 2014 and 2015. What amount should be included in the
deferred income tax liability in Hertz’s December 31, 2012 balance sheet?
a.
$192,000

b.
$248,000

c.
$300,000

d.
$350,000

102.
Dunn,
Inc. uses the accrual method of accounting for financial reporting purposes and
appropriately uses the installment method of accounting for income tax
purposes. Installment income of $1,500,000 will be collected in the following
years when the enacted tax rates are:

Collection of Income

Enacted Tax Rates

2012

$150,000

35%

2013

300,000

30%

2014

450,000

30%

2015

600,000

25%

The installment income is Dunn’s only
temporary difference. What amount should be included in the deferred income tax
liability in Dunn’s December 31, 2012 balance sheet?
a.
$375,000

b.
$427,500

c.
$472,500

d. $525,000

103.
For
calendar year 2012, Kane Corp. reported depreciation of $1,200,000 in its
income statement. On its 2012 income tax return, Kane reported depreciation of
$1,800,000. Kane’s income statement also included $225,000 accrued warranty
expense that will be deducted for tax purposes when paid. Kane’s enacted tax
rates are 30% for 2012 and 2013, and 24% for 2014 and 2015. The depreciation
difference and warranty expense will reverse over the next three years as follows:

Depreciation
Difference

Warranty
Expense

2013

$240,000

$

45,000

2014

210,000

75,000

2015

150,000

105,000

$600,000

$

225,000

These were Kane’s only temporary
differences. In Kane’s 2012 income statement, the deferred portion of its
provision for income taxes should be
a.
$200,700.

b.
$112,500.

c.
$101,700.

d.
$109,800.

To download more slides, ebook, solutions and test bank, visit
http://downloadslide.blogspot.com

Accounting for Income Taxes 19 – 27
1clip_image003.gif”>
104. Wright
Co., organized on January 2, 2012, had pretax accounting income of $640,000 and
taxable income of $1,600,000 for the year ended December 31, 2012 The only
temporary difference is accrued product warranty costs which are expected to be
paid as follows:

2013

$320,000

2014

160,000

2015

160,000

2016

320,000

The enacted
income tax rates are 35% for 2012, 30% for 2013 through 2015, and 25% for 2016.
If Wright expects taxable income in future years, the deferred tax asset in
Wright’s December 31, 2012 balance sheet should be

a.
$192,000.

b.
$224,000.

c.
$272,000.

d.
$336,000.

Get a 20 % discount on an order above $ 40
Use the following coupon code:
LOBSTER
Positive SSL