16-1

PLEASE I LOOK FOR CORRECT ANSWERS FOR ALL THESE QOUESTIONS:

1-For reporting purposes, current deferred tax assets and current deferred tax liabilities are:

A-Netted against one another in the balance sheet.

B-Reported separately in the balance sheet.

C-Reflected only in the notes to the financial statements.

D-Combined respectively with noncurrent deferred tax assets and noncurrent deferred tax liabilities in the balance sheet.

2-Which of the following usually results in an increase in a deferred tax liability?

A-Accrual of estimated operating expenses.

B-Revenue collected in advance.

C-Prepaid operating expenses, currently deductible.

D-All of these answer choices are correct.

3-

Isaac Inc. began operations in January 2016. For certain of its property sales, Isaac recognizes income in the period of sale for financial reporting purposes. However, for income tax purposes, Isaac recognizes income when it collects cash from the buyer's installment payments. In 2016, Isaac had $600 million in sales of this type. Scheduled collections for these sales are as follows:

2016	$60 million
2017	120 million
2018	120 million
2019	150 million
2020	150 million
	$600 million

Assume that Isaac has a 30% income tax rate and that there were no other differences in income for financial statement and tax purposes. Ignoring operating expenses and additional sales in 2017, what deferred tax liability would Isaac report in its year-end 2017 balance sheet?

A-$54 million.

B-$144 million.

C-$126 million.

D-$180 million.

4-

Isaac Inc. began operations in January 2016. For certain of its property sales, Isaac recognizes income in the period of sale for financial reporting purposes. However, for income tax purposes, Isaac recognizes income when it collects cash from the buyer's installment payments. In 2016, Isaac had $600 million in sales of this type. Scheduled collections for these sales are as follows:

2016	$60 million
2017	120 million
2018	120 million
2019	150 million
2020	150 million
	$600 million

Assume that Isaac has a 30% income tax rate and that there were no other differences in income for financial statement and tax purposes. Suppose that, in 2017, legislation revised the income tax rates so that Isaac would be taxed in 2018 and beyond at 40%, rather than 30%. Assume that there were no other differences in income for financial statement and tax purposes. Ignoring operating expenses and additional sales in 2017, what deferred tax liability would Isaac report in its year-end 2017 balance sheet?

A-$168 million.

B-$144 million.

C-$126 million.

D-$240 million

5-Under current tax law, generally a net operating loss may be carried back:

A-2 years.

B-5 years.

C-15 years.

D-20 years

6-On its tax return at the end of the current year Webnet Inc. has $6 million of tax depreciation in excess of depreciation in its income statement. A disclosure note reveals that $1 million of the $6 million difference will reverse itself next year, and the remainder will reverse over the next 4 years. In the absence of other temporary differences, in the balance sheet at the end of the current year Webnet would report:

A-Both a current deferred tax asset and a noncurrent deferred tax asset.

B-A noncurrent deferred tax asset.

C-Both a current deferred tax liability and a noncurrent deferred tax liability.

D-A noncurrent deferred tax liability.

7-For classification purposes, a valuation allowance:

A-Is allocated proportionately between deferred tax assets and deferred tax liabilities.

B-Is allocated proportionately between the current and noncurrent portions of the deferred tax asset.

C-Is allocated proportionately between the current and noncurrent portions of the deferred tax liability.

D-Is added to the deferred tax asset.

8-Which of the following causes a permanent difference between taxable income and pretax accounting income?

A-The installment method used for sales of property.

B-MACRS depreciation method used for equipment.

C-Interest income on municipal bonds.

D-Percentage-of-completion method for long-term construction contracts.