1. (TCO B) Zeff Co. prepared the following reconciliation of its pretax financial statement income to taxable income for the year ended December 31, Year 1, its first year of operations: Pretax financial income $160,000 Nontaxable interest received on municipal securities (5,000) Long-term loss accrual in excess of deductible amount 10,000 Depreciation in excess of financial statement amount (25,000) Taxable income $140,000 Zeff's tax rate for Year 1 is 40%. In its Year 1 income statement, what amount should Zeff report as income tax expense-current portion? (Points : 5)

$52,000 $56,000 $62,000 $64,000

Question 2. 2. (TCO B) Thorn Co. applies Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. At the end of Year 1, the tax effects of temporary differences were as follows: Deferred tax assets Related asset (liabilities) classification Accelerated tax depreciation ($75,000) Noncurrent asset Additional costs in inventory for tax purposes 25,000 Current asset ($50,000) A valuation allowance was not considered necessary. Thorn anticipates that $10,000 of the deferred tax liability will reverse in Year 2. In Thorn's December 31, Year 1, balance sheet, what amount should Thorn report as noncurrent deferred tax liability under U.S. GAAP? (Points : 5)

$40,000 $50,000 $65,000 $75,000

Question 3. 3. (TCO B) Orleans Co., a cash basis taxpayer, prepares accrual basis financial statements. In its Year 2 balance sheet, Orleans' deferred income tax liabilities increased compared to Year 1. Which of the following changes would cause this increase in deferred income tax liabilities? I. An increase in prepaid insurance. II. An increase in rent receivable. III. An increase in warranty obligations. (Points : 5)

I only. I and II. II and III. III only.