1. In 2018, the ABC accountant forgot to include in the final inventory count merchandise that was in transit and whose terms were FOB-shipping point. The merchandise in transit had a total cost of $ 27759. The merchandise was received on January 15, 2019. The ending inventory for 2019 was correctly counted for a total of $ 144211. The company uses the periodic inventory method. Assuming the error was not discovered in either 2018 or 2019, what is the effect of the error on the retained earnings balance as of 1/1/20? (ignore any tax effect),

Select one:

a. The balance is overestimated by 116,452. B. The balance is overestimated 27759.

c. The balance is correct.

d. The balance is underestimated by 116,452. E. The balance is underestimated by 27,759.

2. The DTA account must be reduced by a valuation allowance.

Select one:

a. if, based on all the available evidence, it is 100% certain that some portion, or 100%, of the deferred taxable asset is not realized.

b. If, based on all the available evidence, it is more likely than 100%, the deferred taxable asset will not be realized.

c. yes, based on all the available evidence, it is more likely than not ("more likely than not") that some portion, or 100%, of the deferred taxable asset is not realized.

d. always. Same as accounts receivable and the estimate of the provision for bad debts.

3. In 2020, its first year of operations, ABC reported a net operating loss of $ 250067 and as a consequence recognized a deferred taxable asset (DTA) for the same year. The following year, 2021, the company reported taxable income of $ 147,845 before any net operating loss from prior periods. The company's tax rate was 0.28 for both years. Assuming that the company used the full benefit allowed for the loss of 2020 under the new tax reform, how much will it adjust the "Deferred Tax Asset" account in 2021?

Select one:

a. 41396.60

b. 8279.32

c. 33117.28

d. 70018.76

4. ABC Companies is incorporated in Delaware, E.U. In 2020, its first year of operations, ABC reported an operating loss of $ 538944 in its books and in its tax return. During the first two years of operations there were NO permanent or temporary differences between book income and taxable income. The tax rate legislated for 2020 is 0.39 and for all subsequent periods a rate of 0.29 has already been legislated. The company expects to report an income of $ 724287 by 2021 on both the payroll and the books. Therefore, it is more than likely that the benefit of any deferred tax asset will be realized. The entry for the 2020 tax expense will include a

Select one:

a. credit to "Income Tax Benefit" for $ 156294

b. debit to "Deferred Tax Asset" for $ 210043

c. debit to "Income Tax Benefit" for $ 156294

d. debit to "Deferred Tax Asset" for $ 210188

5. On January 1, 2017, equipment was purchased for $ 108,810 and was recorded as an error expense. Generally, the company uses a residual value of zero and an estimated useful life of 10 years for assets of this type. The company uses the straight-line method to depreciate all of its assets. The bug was discovered and corrected in early 2020 (before adjustments). Ignoring any tax effect, the entry to correct the error will include a Select one:

a. CR CR a Retained Earnings of $$ 138853.

b. DR depreciation expense of $ 32043.

c. DR to Retained Earnings of $ 74767.

d. CR a Accumulated Depreciation for $ 32043.

6. Following is information related to the Statement of Income and Expenses of ABC, Inc. for the period ended December 31, 2020. The company reported a pre-tax income of $ 106,210. The company recorded a profit from discontinued operations before taxes of $ 53,105. The income according to books is equal to the taxable income because there are no differences, neither permanent nor temporary. The company's tax rate is 0.28. Which of the following accounts presented in the 2020 Statement of Income and Expenses is correct and shows the concept of "intraperiod tax allocation"?

Select one:

a. Tax expense 44608

b. Income before taxes 159315

c. Income from discontinued operations 38236

d. Income from discontinued operations 53105

7. ABC began operations on January 1, 2019. Its financial statements contained the following errors: The ending inventory for 2019 was overestimated by $ 26019 but the ending inventory for 2020 was correctly accounted for. In addition, on December 31, 2020, a totally depreciated equipment was sold for $ 3,366 (book value = $ 0), however, the sale was not recorded. No entries were made to correct these errors and the 2020 temporary accounts have already been closed. Ignoring any tax effect, the total effect of these errors on the balance of retained earnings as of December 31, 2020 is

Select one:

a. overestimated by $ 3366.

b. underestimated by $ 29385.

c. overestimated by $ 22,653.

d. underestimated by $ 3366.

8. At the end of its first year of operations, ABC prepared the reconciliation of its book income and its taxable income for 2020 as follows: Income before taxes $ 2388296 less: Income from dividends (68980) Unearned rental income 186390 Obligation for expenses of guarantees 261850 less: Additional depreciation in the return (870818) Taxable Income $ 1896738

i. Unearned rental income corresponds to the collection of a 6-month rental that covers the period from January 1, 2021 to June 30, 2021.

ii. In 2021, $ 392,775 was disbursed to meet the company's guarantees. However, the estimated expense for guarantees in the Statement of Income and Expenses for 2021 was $ 235665

iii. In 2021, the depreciation expense on the books is greater than that of the return by $ 220,734.

The enacted tax rate for the current period is 0.44. Congress has already drafted the bill to reduce the corporation tax rate to 0.28 effective next year. The project was approved shortly before the end of the second quarter of 2021. As of 12/31/2021 the ABC Statement of Financial Position will report a Deferred Tax Debt (DTL) for

Select one:

a. 834564.72

b. 152696.32

c. 211350.72

d. 108705.52

e. 239951.36