Question
7. In Year One, a company has revenues of $500,000 and expenses of $300,000. Of the expenses, $50,000 represents a warranty on a company product.
7. In Year One, a company has revenues of $500,000 and expenses of $300,000. Of the expenses, $50,000 represents a warranty on a company product. However, the company only paid $10,000 as a result of this warranty. The remainder is expected to be paid in a future year in which company officials believe there is a 46 percent chance that the company will have taxable income to be reduced by this warranty cost. The enacted tax rate is 30 percent for Year One and 32 percent in periods after that. What is the total amount of income tax expense to be recognized in Year One ?
$59,000 | ||
$60,000 | ||
$59,200 | ||
$72,000 |
8. The Lancaster Corporation reports net income for Year One of $600,000. Within that income, a $50,000 expense cannot be taken legally as a tax deduction. Of the company's revenues, $60,000 will not be taxed until Year Two while a final $70,000 will be taxed in Year Three. The enacted tax rate for Years One and Two is 27 percent. After that, the enacted tax rate is 30 percent. On the company's Year One income statement, what is the total amount reported as income tax expense for the year ?
$155,500 | ||
$150,600 | ||
$175,500 | ||
$177,600 |
9. A company ends Year One with a noncurrent deferred income tax liability of $42,000 and a noncurrent deferred income tax asset of $45,000. The noncurrent asset also has a valuation allowance of $4,000.
On its Year One balance sheet, what is shown for deferred income taxes
A deferred income tax liabilitynoncurrent of $26,000, a deferred income tax assetnoncurrent of $14,000, a deferred income tax liabilitycurrent of $16,000, and a deferred income tax assetcurrent of $27,000 | ||
A $12,000 deferred liability-noncurrent and a $11,000 deferred asset-current | ||
A $1,000 deferred income tax liability | ||
A $42,000 deferred liability and a $41,000 deferred asset |
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