Question
1-Black Co., organized on January 2, Year1, had pretax accounting income of $500,000 and taxable income of $800,000 for the year ended December 31, Year1.
1-Black Co., organized on January 2, Year1, had pretax accounting income of $500,000 and taxable income of $800,000 for the year ended December 31, Year1. Black expected to maintain this level of taxable income in future years. The only temporary difference is for accrued product warranty costs, expected to be paid as follows:Year2$100,000Year350,000Year450,000Year5100,000The applicable enacted income tax rate is 30%. In Blacks December 31, Year1, balance sheet, the deferred income tax asset and related valuation allowance should beDeferredValuationTax AssetAllowance
A.
$0
$0
B.
$90,000
$0
C.
$90,000
$90,000
D.
$0
$90,000
2-A tax rate other than the current tax rate may be used to calculate the deferred income tax amount on the statement of financial position if a(n)
A.
Future tax rate has been enacted into law.
B.
Election has been made to apply past tax rates.
C.
Net operating loss carryback exists.
D.
Future tax rate change is considered more likely than not to occur.
3-On September 15, Year 4, the county in which Spirit Company operates enacted changes in the countys tax law. These changes are to become effective on January 1, Year 5. They will have a material effect on the deferred tax amounts that Spirit reported. In which of the following interim and annual financial statements issued by Spirit should the effect of the changes in tax law initially be reported?
A.
The annual financial statements for the year ending December 31, Year 5.
B.
The interim financial statements for the 3-month period ending March 31, Year 5.
C.
The annual financial statements for the year ending December 31, Year 4.
D.
The interim financial statements for the 3-month period ending September 30, Year 4.
4-The guidance on accounting for income taxes establishes standards for taxes that are currently payable and for
A.
The method of accounting for the U.S. federal investment tax credit.
B.
The tax consequences of revenues and expenses included in taxable income in a different year from the year in which they are recognized for financial reporting purposes.
C.
The discounting of income taxes.
D.
The accounting for income taxes in general in interim periods.
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