Multiple Choice Questioml For the questions from 1 to 3] AAA Corporation has only one temporary difference at the end of 2014. All the difference reverse and cause deductible amounts of $10,000 in 2015. AAA's taxable income (TT for is $300,000. The tax rate is 30% for all years. 1. What is the amount of AAA's financial income (FI) for 2014? a. $280,000 b. $ 290,000 c. $ 300,000 d. $ 310,000 The journal entry for 2014? a. Debit to Deferred Tax Liability (DTL) b. Debit to Deferred Tax Asset (DTA) c. Credit to Deferred Tax Liability (DTL) d. None of the above. 2. What is the amount of AAA's income tax expense on the 2014 income statement? a. $87,000 b. $90,000 c. $93,000 d. $ 96,000 3. For the questions from 4 to 5 The following facts related to Duncan Corp. 1. Deferred Tax Assets (DTA), January 1, 2014, $60,000. 2. Taxable income (TI) for 2014, $200,000. 3. Cumulative temporary difference at December 31, 2014, giving rise to future deductible amounts, $230,000. 4, "The tax rate for all years is 40%. 4. The journal entry for 2014? a. Debit to Deferred Tax Expense b. Debit to Deferred Tax Asset (DTA) c. Credit to Deferred Tax Revenue d. Credit to Deferred Tax Asset (DTA) 5. What is the amount of AAA's income tax expense on the 2014 income statement? a. $ 8,000 b. $ 32,000 e. $ 48,000 d. $ 92,000 6. All of the following increase pension expense except: a. Service cost b. Actual return on plan asset Prior service cost amortization All of the above c. d. All of the following affect projected benefit obligations except; a. Service cost b. Prior service cost amortization c. Prior service cost creation establishment) d. Benefit paid 7. Which one of the followings affeets both projected benefit obligations and plan assets? a. Service cost b. Contribution c. Benefit paid d. None of the above 8. A company adopts its pension plans this year for the first time so it creates 9. (eestablisbhes) prior service cost. The creation (establishmcnt) of prior service cost leads to: a. An increase in Equity b. An increase in Asset c. A decrease in Equity d. A decrease in Asset 10. Amortization of prior service cost leads to: a. A decrease in Asset b. A decrease in Liability c. A decrease in Equity d. None of the above In the Pension worksheet, the expected rate of return is used in computing: a. Actual return of pension b. Expected interest of projected benefit obligation c. Amortization of prior service d. Gain/Loss 11. For the questions from 12 to 16) Athena Company has a machine with a fair market value of $760,000, which is leased to Nobu Company on January 1, 2014. The lease term has 7 years and its expected useful life is 8 year The machine is estimated to have a guaranteed residual value of $76,000 at the end of 7 years The residual value at the end of the lease term is expected to be $76,000. The lease agreement requires the lessee to pay equal annual rental payments on January I. The Nobu's incremental borrowing rate is 10%. The Athena's implicit interest rate is 12% and it is known to the lessee. What is the amount of annual rental payment? a. $130,917 b. $148,687 c. $134,634 d. $141,961 12. 13. What is the amount the lessee must capitalize on January 1, 2014? a. $ 725,621 b. $ 721,000 c. $ 760,000 d. $ 760,238 14. What is the journal entry the lessee must make on January 1, 2014? a. Cash is debited. b. Accumulated Depreciation is credited. c. Lease Liability is credited. d. None of the above is correct. 15. What is the journal entry the lessee must make on December 31, 2014 a. Cash is debited. b. Accumulated Depreciation is credited. c. Lease Liability is credited. d. None of the above is correct