1. In an operating lease, the amortization of the right-of-use asset in the fourth year is

A the same as in the third year.

B zero.

C less than in the third year.

D more than in the third year.

2. Which of the following statements characterizes an operating lease?

A The lessee has an option to purchase the leased assets and is reasonably sure to exercise the option.

B The lessor records interest revenue.

C The lessee records an asset and a liability for the total of the lease payments.

D The lessee reports cash outflows as operating activities.

3. The following information relates to Top Choice Freightways for its first year of operations (data in millions of dollars):

Pretax accounting income: $225

Pretax accounting income included:

Municipal bonds interest (not taxable for tax purposes) 5

Depreciation expense 60

Depreciation in the tax return 100

The applicable tax rate is 25%. There are no other temporary or permanent differences. Top Choice's net income is:

A $157.5 million

B $165.0 million

C $168.8 million

D $170.0 million

4. Silver Co. had a decrease in deferred tax liability of $25 million and a decrease in deferred tax assets of $20 million for this year. Its taxable income was $360 million. The company is subject to a tax rate of 25%. The total income tax expense for the year ($ in millions) was:

A $95 million

B $135 million

C $45 million

D $85 million