***PLEASE ANSWER ALL QUESTIONS***

1. The following information relates to First Airway for its first year of operations (data in millions of dollars):

Pretax accounting income:	$	195
Pretax accounting income included:
Overweight fines (not deductible for tax purposes)		5
Depreciation expense		70
Depreciation in the tax return		110

The applicable tax rate is 25%. There are no other temporary or permanent differences.

Which of the following must First Airways disclose related to the income tax expense reported in the income statement ($ in millions)?

A) Only the current portion of tax expense of $40.

B) Only the total tax expense of $50.

C) Both the current portion of the tax expense of $40 and the deferred portion of the tax expense of $10.

D) None of these answer choices are correct.

2. All of the following are characteristics of a qualified pension plan, except for?

A) It can be limited to highly compensated salaried employees.

B) It must be funded in advance of retirement.

C) Benefits must vest after a specified period of service.

D) It must cover at least 70% of employees.

3. Steamy Hot Tubs has provided a defined benefit pension plan for its employees for several years. At the end of the most recent year, the following information was available with regard to the plan: service cost: $6.2 million, expected return on plan assets: $1.2 million, actual return on plan assets: $1 million, interest cost: $1.4 million, payments to retired employees: $2 million, and amortization of prior service cost (created when the pension plan was amended causing a drop in the projected benefit obligation): $1.1 million. What amount should Steamy Hot Tubs report as pension expense in its income statement for the year?

A) $1.4 million

B) $7.5 million

C) $7.7 million

D) $8.7 million