Question 6 Which of the following would result in a deferred tax liability? recognizing product warranty costs for tax purposes as the warranty conditions are met, but recognized for accounting purposes earlier on the accrual basis. O a gain on installment sales is recognized for tax purposes as the receivable is collected, but was recognized earlier for accounting purposes when the sale was made the company uses statutory depletion for tax purposes, but uses cost depletion for books. O All of the above are examples situations that would result in a deferred tax liability Question 7 A valuation allowance would exist as a contra account to the deferred tax assets if it is: O "probable" that all of the gross amount of the deferred tax assets is expected to be realized o "probable" that only a small portion of the deferred tax assets are expected to be realized O"more likely than not" that only a portion of the gross amount of the deferred tax assets is expected to be realized. O "more likely than not that the entire amount is to be realized. Question 8 A company expects to lose a lawsuit and reports an estimated amount as a loss in its income statement and a liability in its balance sheet. As a result the company has a O temporary difference requiring intraperiod income tax allocation. O permanent difference not requiring interperiod income tax allocation deferred tax asset O deferred tax liability Question 9 Poole & Co. had a temporary difference of $45 million resulting in a deferred tax liability of $15 million. What is the impact on income tax expense and net income? O income tax expense increases and net income decreases income tax expense increases and net income increases Income tax expense decreases and net income decreases o income tax expense decreases and net income decreases Question 10 2 pts The amount of Prior Service Cost is affected when the settlement rate increases the plan is amended to increase benefits the settlement rate decreases the actual return exceeds the expected return Question 11 3 pts Cross Company reported the following results for the year ended December 31, year 1, its first year of operations: Year 1 Income (per books before income taxes) $ 1,500,000 Taxable income 2,400,000 The disparity between book income and taxable income is attributable to a temporary difference which will reverse in year 2. What should Cross record as a net deferred tax asset or liability for the year ended December 31, year 1, assuming that the enacted tax rates in effect are 40% in year 1 and 35% in year 2? $360,000 deferred tax liability O $315,000 deferred tax asset $360,000 deferred tax asset $315,000 deferred tax liability Question 14 3 pts On January 1 of the current year, Parks Co, has the following balances Projected benent obligation $4,200,000 Fair value of plan assets 3,750,000 The settlement rate is 10%. Other data related to the pension plan for the current year arc: % : Service cost $240,000 Amortization of prior service costs 54.000 Contributions 270.000 Benefits paid 250,000 Actual return on plan assets 264.000 Amortization of net gain 18,000 The fair value of the plan assets at December 31 of the current year is $3.506,000 $3.764,000 $4,034 000 $4,284,000 Question 15 1 pts If the expected return on pension assets is 3% and the actual return is 4%, the company has an actuarial gain. True False Question 16 1 pts The "asset/liability method of accounting for inter-period income tax allocation, currently required by GAAP, requires the deferred tax balances be computed using rates under currently enacted tax law that will be in effect when temporary differences are expected to reverse False Question 17 1 pts When calculating pension experise, companies must use the Corridor approach to amortize actuarial and experience gains and losses. * True OP