CHAPTER 19 ACCOUNTING FOR INCOME TAXES

| November 9, 2018

82.
Fleming
Company has the following cumulative taxable temporary differences:

12/31/13 12/31/12$960,000 $1,350,000

The tax rate enacted for 2013 is 40%,
while the tax rate enacted for future years is 30%. Taxable income for 2013 is
$2,400,000 and there are no permanent differences. Fleming’s pretax financial
income for 2013 is:

a.
$1,440,000

b.
$2,010,000

c.
$2,595,000

d.
$3,360,000

83.
Larsen
Corporation reported $100,000 in revenues in its 2012 financial statements, of
which $55,000 will not be included in the tax return until 2013. The enacted
tax rate is 40% for 2012 and 35% for 2013. What amount should Larsen report for
deferred income tax liability in its balance sheet at December 31, 2012?
a.
$19,250

b.
$22,000

c.
$24,500

d.
$28,000

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Accounting for Income Taxes 19 – 21
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84. Duncan Inc. uses the accrual method of
accounting for financial reporting purposes and appropriately uses the
installment method of accounting for income tax purposes. Profits
of $900,000 recognized for books in 2012 will be
collected in the following years:

Collection of
Profits

2013

$150,000

2014

$300,000

2015

$450,000

The enacted tax rates are: 40% for
2012, 35% for 2013, and 30% for 2014 and 2015. Taxable income is expected in
all future years. What amount should be included in the December 31, 2012,
balance sheet for the deferred tax liability related to the above temporary
difference?

a.
$
52,500
b.
$225,000

c.
$277,500

d.
$360,000

85.
At
December 31, 2012 Raymond Corporation reported a deferred tax liability of
$150,000 which was attributable to a taxable type temporary difference of
$500,000. The temporary difference is scheduled to reverse in 2016. During
2013, a new tax law increased the corporate tax rate from 30% to 40%. Raymond
should record this change by debiting
a.
Retained
Earnings for $50,000.
b.
Retained
Earnings for $15,000.
c.
Income
Tax Expense for $15,000.
d.
Income
Tax Expense for $50,000.

86.
Palmer
Co. had a deferred tax liability balance due to a temporary difference at the
beginning of 2012 related to $800,000 of excess depreciation. In December of
2012, a new income tax act is signed into law that lowers the corporate rate
from 40% to 35%, effective January 1, 2014. If taxable amounts related to the
temporary difference are scheduled to be reversed by $400,000 for both 2013 and
2014, Palmer should increase or decrease deferred tax liability by what amount?

a.
Decrease
by $40,000
b.
Decrease
by $20,000
c.
Increase
by $20,000
d.
Increase
by $40,000

87.
A
reconciliation of Gentry Company’s pretax accounting income with its taxable
income for 2012, its first year of operations, is as follows:

Pretax accounting income

$3,000,000

Excess
tax depreciation

(180,000)

Taxable income

$2,820,000

The excess
tax depreciation will result in equal net taxable amounts in each of the next
three years. Enacted tax rates are 40% in 2012, 35% in 2013 and 2014, and 30%
in 2015. The total deferred tax liability to be reported on Gentry’s balance
sheet at December 31, 2012, is

a.
$72,000.

b.
$60,000.

c.
$63,000.

d.
$54,000.

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19 – 22 Test Bank for Intermediate Accounting,
Fourteenth Edition
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88.
Khan,
Inc. reports a taxable and financial loss of $1,300,000 for 2013. Its pretax
financial income for the last two years was as follows:

2011

$600,000

2012

800,000

The amount
that Khan, Inc. reports as a net loss for financial reporting purposes in 2013,
assuming that it uses the carryback provisions, and that the tax rate is 30%
for all periods affected, is

a.
$1,300,000
loss.
b.
$
-0-.
c.
$390,000
loss.
d.
$910,000
loss.

Use the following information for
questions 89 and 90.

Wilcox Corporation reported the
following results for its first three years of operation:

2012 income (before income taxes)

$ 150,000

2013
loss (before income taxes)

(1,350,000)

2014 income (before income taxes)

1,500,000

There were no permanent or temporary
differences during these three years. Assume a corporate tax rate of 30% for
2012 and 2013, and 40% for 2014.

89.
Assuming
that Wilcox elects to use the carryback provision, what income (loss) is
reported in 2013? (Assume that any deferred tax asset recognized is more likely
than not to be realized.)

a.
$(1,350,000)

b.
$
-0-
c.
$(1,305,000)

d.
$ (825,000)

90.
Assuming
that Wilcox elects to use the carryforward provision and not the carryback
provision, what income (loss) is reported in 2013?

a.
$(1,350,000)

b.
$(810,000)

c.
$
-0-
d.
$(1,305,000)

91.
Rodd
Co. reports a taxable and pretax financial loss of $600,000 for 2013. Rodd’s
taxable and pretax financial income and tax rates for the last two years were:

2011

$600,000

30%

2012

600,000

35%

The amount that Rodd should report as
an income tax refund receivable in 2013, assuming that it uses the carryback
provisions and that the tax rate is 40% in 2013, is

a.
$180,000.

b.
$210,000.

c.
$240,000.

d.
$270,000.

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