Question : 61.The following information was taken from the annual report of : 1253498

 

61.The following information was taken from the annual report of Jones Inc.

 

 

2010

2009

BALANCE SHEET

 

 

Deferred income tax liability

$29,700

$28,300

 

 

 

INCOME STATEMENT

 

 

Income before taxes

$88,000

 

Income tax expense

(30,400)

 

Net income

$57,600

 

Effective income tax rate 40%

 

 

 

What is Jones’s conservatism ratio?

a. 1.02

b. 1.52

c. 2.89

d. 1.21

62.The following information was taken from the annual report of Jones Inc.

 

 

2010

2009

BALANCE SHEET

 

 

Deferred income tax liability

$29,700

$28,300

 

 

 

INCOME STATEMENT

 

 

Income before taxes

$88,000

 

Income tax expense

(30,400)

 

Net income

$57,600

 

Effective income tax rate 40%

 

 

 

Based on this information, what journal entry shouldJones make in 2010 to record its income taxes?

a.Income Tax Expense..              30,400

Deferred Income Tax …              29,700

Deferred Income Tax …                            28,300

Income Tax Payable …                            31,800

b.Income Tax Expense..              30,400

Deferred Income Tax …                            29,700

Income Tax Payable …                            700

c.Income Tax Expense..              31,800

Deferred Income Tax …                            1,400

Income Tax Payable …                            30,400

d.Income Tax Expense..              30,400

Deferred Income Tax …                            1,400

Income Tax Payable …                            29,000

63.The following information was taken from the annual report of Leno Inc.

 

 

2010

2009

BALANCE SHEET

 

 

Deferred income tax liability

$58,300

$59,400

 

 

 

INCOME STATEMENT

 

 

Income before taxes

$108,000

 

Income tax expense

(40,400)

 

Net income

$67,600

 

Effective income tax rate 35%

 

 

 

What is Leno’s conservatism ratio?

a. 0.63

b. 0.91

c. 0.69

d. 0.86

64.The following information was taken from the annual report of Leno Inc.

 

 

2010

2009

BALANCE SHEET

 

 

Deferred income tax liability

$58,300

$59,400

 

 

 

INCOME STATEMENT

 

 

Income before taxes

$108,000

 

Income tax expense

(40,400)

 

Net income

$67,600

 

Effective income tax rate 35%

 

 

 

Based on this information, what journal entry shouldLeno make in 2010 to record its income taxes?

a.  Income Tax Expense.              40,400

Deferred Income Tax …              58,300

Deferred Income Tax …                            59,400

Income Tax Payable …                            39,300

b.  Income Tax Expense.              40,400

Deferred Income Tax …              19,000

Income Tax Payable …                            59,400

c.  Income Tax Expense.              40,400

Deferred Income Tax …              1,100

Income Tax Payable …                            41,500

d.  Income Tax Expense.              40,400

Deferred Income Tax …              17,900

Income Tax Payable …                            58,300

65.Julia Used Cars offers a one-year warranty from the date of sale on all cars it sells.  From historic data, Bill Julia estimates that, on average, each car will require the company to incur warranty cost of $820.  The cars sold for an average of $9,500 each. The following activities occurred during 2010.

 

Feb

4

Sold five cars.

Mar

23

Sold ten cars.

May

20

Incurred warranty costs of $6,000 on four cars sold in 2008.

July

6

Sold eight cars.

Sep

1

Incurred warranty costs of $5,000 on five cars sold in 2008.

Nov

14

Incurred warranty costs of $4,000 on one car sold in 2008.

Dec

22

Sold twelve cars.

 

If Julia accrued its warranty liability with a single adjusting entry at year-end, the journal entry would include:

a. a debit to Contingent Warranty Liability for $28,700

b.a debit to Warranty Expense for $28,700

c. a credit to Parts for $17,220

d. a credit to Cash for $28,700

66.Julia Used Cars offers a one-year warranty from the date of sale on all cars it sells.  From historic data, Bill Julia estimates that, on average, each car will require the company to incur warranty cost of $820.  The following activities occurred during 2010.

 

Feb

4

Sold five cars.

Mar

23

Sold ten cars.

May

20

Incurred warranty costs of $6,000 on four cars sold in 2009.

July

6

Sold eight cars.

Sep

1

Incurred warranty costs of $5,000 on five cars sold in 2009.

Nov

14

Incurred warranty costs of $4,000 on one car sold in 2009.

Dec

22

Sold twelve cars.

 

If the January 1, 2010 beginning balance in the warranty liability account was $2,500, what would be the year-end warranty liability balance?

a. $31,200

b. $16,200

c. $11,200

d. $13,700

67.Julia Used Cars offers a one-year warranty from the date of sale on all cars it sells.  From historic data, Bill Julia estimates that, on average, each car will require the company to incur warranty cost of $820.  The cars sold for an average of $9,500 each. The following activities occurred during 2010.

 

Feb

4

Sold five cars.

Mar

23

Sold ten cars.

May

20

Incurred warranty costs of $3,000 on four cars sold in 2009.

July

6

Sold eight cars.

Sep

1

Incurred warranty costs of $5,000 on five cars sold in 2009.

Nov

14

Incurred warranty costs of $6,000 on one car sold in 2009.

Dec

22

Sold twelve cars.

 

Assume that the breakdown of warranty costs is 40% parts and 60% wages (paid in cash). Based on this information, which of the following journal entries would be made on September 1?

a.Warranty Expense5,000

Contingent Warranty Liability5,000

b.  Warranty Expense5,000

Cash3,000

Parts2,000

c.  Cash3,000

Parts2,000

Contingent Warranty Liability5,000

d.  Contingent Warranty Liability 5,000

Cash3,000

Parts2,000

 

 

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