1) A Corporation has a $1-million, 6% debt issue that is convertible into 10,000 common shares. Net income for the year is $210,000, the weighted average number of common shares outstanding is 100,000 shares, and the tax rate is 20%. Is the convertible debt antidilutive?

2)Scenario (this is not a question. See 2A and 2B below for exam questions)

Assume that B Corporation reports accounting income of $200,000 in each of the years 2020, 2021, and 2022 and has multiple differences between accounting income and taxable income. Assume also that the company is subject to a 30% tax rate in each year, and has the differences between income reported on the financial statements and taxable income, as shown in 2A and 2B below.

2. A) Royalty revenue of $18,000 earned in 2020 is recognized for financial reporting purposes in 2020. The revenue is considered taxable when receivedin equal monthly payments over

18 months beginning January 1, 2021.

Is this a reversible or permanent difference? Explain the reason for your answer.

2. B) A premium of $5,000 is paid in each of 2021 and 2022 for life insurance that the company

carries on key officers. This is not deductible for tax purposes, but is expensed for accounting

purposes.

Is this a reversible or permanent difference? Explain the reason for your answer.

3) A company has trade accounts receivable with a carrying amount of $10,000. The related revenue is taxable as it is earned and is included in taxable income as it is recognized in the accounts.

4) A company receives $1,000 of interest in advance and recognizes this as unearned revenue, a liability. The interest was taxed on a cash basis, when it was received.

Determine the tax base of the liability. Also, discuss the related rationale based on the definition of the tax base of liabilities.