Question : 91. In any given accounting period, the amount a firm reports : 1245697

 

 

91. In any given accounting period, the amount a firm reports as income before income taxes for financial reporting in comparison to the amount of taxable income that appears on its income tax return may differ due to temporary differences. The temporary differences may create a deferred tax asset due to A. providing for estimated warranty costs in the year a firm sells the warranted product but claiming a tax deduction later, when the firm makes actual expenditures for warranty repairs.B. reporting bad debt expense in the year a firm makes a credit sale, but claiming a tax deduction later, when the firm writes off specific uncollectible accounts.C. interest revenue on municipal bonds.D. choices a and b. E. choices a, b, and c.

 

92. In its first year of operations, Lear Company reported financial statement income (prior to income tax expense) of $100,000. In the same year, Lear Company reported $80,000 of taxable income, the difference being due to temporary differences. Assuming the enacted tax rate for the current year and all future years is 30%, what is Lear’s current year adjustment for deferred income taxes? A. Debit to Deferred Income Tax Liability for $6,000B. Debit to Income Tax Expense for $6,000C. Credit to Income Taxes Payable for $6,000D. Credit to Deferred Income Tax Liability for $6,000 E. Credit to Income Tax Expense for $6,000

 

93. In any given accounting period, the amount a firm reports as income before income taxes for financial reporting in comparison to the amount of taxable income that appears on its income tax return may differ due to temporary differences. Temporary differences include A. bad debt expense, only.B. depreciation on long-lived assets, only.C. interest revenue on municipal bonds, only.D. certain fines and penalties, only.E. bad debt expense and depreciation on long-lived assets.

 

94. In any given accounting period, the amount a firm reports as income before income taxes for financial reporting in comparison to the amount of taxable income that appears on its income tax return may differ due to permanent differences. Permanent differences include A. interest revenue on municipal bonds.B. depreciation on long-lived assets.C. bad debt expense.D. warranty expense.E. none of the above.

 

95. Gordon CorporationInformation relating to Gordon Corporation for Year 1 and Year 2 is as follows: 

 

Year 1

Year 2

Income before taxes

$5,000,000

$4,000,000

Interest income included above that was not subject to income    taxes

100,000

100,000

 

 

 

 

·

Income before income taxes in Year 1 included rent revenue of $80,000 that was not subject to income tax until its receipt in Year 2

·

Gordon was subject to an effective income tax rate of 40% in Year 1 and 2.

 

 

(CMA adapted, Jun 86 #7) Refer to the Gordon Corporation example. The amount of current income tax expense that would have been reported on Gordon Corporation’s Income Statement for the year ended December 31, Year 1 is A. $1,928,000B. $1,960,000C. $1,980,000D. $1,992,000E. $2,000,000

 

96. Gordon CorporationInformation relating to Gordon Corporation for Year 1 and Year 2 is as follows: 

 

Year 1

Year 2

Income before taxes

$5,000,000

$4,000,000

Interest income included above that was not subject to income    taxes

100,000

100,000

 

 

 

 

·

Income before income taxes in Year 1 included rent revenue of $80,000 that was not subject to income tax until its receipt in Year 2

·

Gordon was subject to an effective income tax rate of 40% in Year 1 and 2.

 

 

(CMA adapted, Jun 86, #9) Refer to the Gordon Corporation example. Gordon Corporation’s current income tax expense for Year 2 was A. $1,560,000B. $1,570,000C. $1,592,000D. $1,600,000E. $1,632,000

 

97. Gordon CorporationInformation relating to Gordon Corporation for Year 1 and Year 2 is as follows: 

 

Year 1

Year 2

Income before taxes

$5,000,000

$4,000,000

Interest income included above that was not subject to income    taxes

100,000

100,000

 

 

 

 

·

Income before income taxes in Year 1 included rent revenue of $80,000 that was not subject to income tax until its receipt in Year 2

·

Gordon was subject to an effective income tax rate of 40% in Year 1 and 2.

 

 

(CMA adapted, Jun 86 #10) Refer to the Gordon Corporation example. The amount of deferred income taxes that would have been reported on Gordon Corporation’s Statement of Financial Position on December 31, Year 2, is A. $40,000B. $32,000C. $16,000D. $8,000E. zero

 

98. In any given accounting period, the amount a firm reports as income before income taxes for financial reporting in comparison to the amount of taxable income that appears on its income tax return may differ due to A. permanent differences, only.B. temporary differences, only.C. nominal differences, only.D. permanent and temporary differences, only.E. permanent, temporary, and nominal differences.

 

99. When faced with uncertainty, firms may want to keep liabilities off their balance sheets. Such firms may attempt to engage in off-balance-sheet financing.Required: 

a.

Why might firms want to keep liabilities off their balance sheets?

b.

How might firms attempt to keep liabilities off their balance sheets?