1. Which of the following is a temporary difference classified as a revenue or gain that is taxable after it is recognized in financial income? A) Subscriptions received in advance B) Prepaid royalty received in advance. C) An installment sale accounted for on the accrual basis for financial reporting purposes and on the installment (cash) basis for tax purposes. Interest received on a municipal obligation. D) 2. On January 2, 2018, Farr Co. issued 10-year convertible bonds at 105. During 2018, these bonds were converted into common stock having an aggregate par value equal to the total face atiount of the bonds. At conversion, the market price of Farr's common stock was 50 percent above its par value. On January 2, 2018, cash proceeds from the issuance of the convertible bonds should be reported as A) paid-in capital for the entire proceeds. B) paid-in capital for the portion of the proceeds attributable to the conversion feature and as a liability for the balance. C) a liability for the face amount of the bonds and paid-in capital for the premium over the face amount. a liability for the entire proceeds. D) 3. The date on which to measure the compensation element in a stock option granted to a corporate employee ordinarily is the date on which the employee A) is granted the option. B) has performed all conditions precedent to exercising the option. C) may first exercise the option. D) exercises the option. 4. In 2018, Krause Company accrued, for financial statement reporting, estimated losses on disposal of unused plant facilities of $3,600,000. The facilities were sold in March 2019 and a $3,600,000 loss was recognized for tax purposes. Also in 2018, Krause paid $150,000 in premiums for a two-year life insurance policy in which the company was the beneficiary. Assuming that the enacted tax rate is 30% in both 2018 and 2019, and that Krause paid $1,170,000 in income taxes in 2018, the amount reported as net deferred income taxes on Krause's balance sheet at December 31, 2018, should be a A) $1,020,000 asset. B) $540,000 asset. C) $540,000 liability D) $1,080,000 asset
