61.Dwyer Company reported the following results for the year ended December 31, 2007, its first year of operations:
Income (per books before income taxes) $ 750,000
Taxable income 1,200,000
The disparity between book income and taxable income is attributable to a temporary difference which will reverse in 2008. What should Dwyer record as a net deferred tax asset or liability for the year ended December 31, 2007, assuming that the enacted tax rates in effect are 40% in 2007 and 35% in 2008? a. $180,000 deferred tax liability
b.$157,500 deferred tax asset
c.$180,000 deferred tax asset
d.$157,500 deferred tax liability
62.In 2007, Admire Company accrued, for financial statement reporting, estimated losses on disposal of unused plant facilities of $1,500,000. The facilities were sold in March 2008 and a $1,500,000 loss was recognized for tax purposes. Also in 2007, Admire paid $100,000 in premiums for a two-year life insurance policy in which the company was the beneficiary. Assuming that the enacted tax rate is 30% in both 2007 and 2008, and that Admire paid $780,000 in income taxes in 2007, the amount reported as net deferred income taxes on Admire's balance sheet at December 31, 2007, should be a a. $420,000 asset.
Use the following information for questions 63 and 64.
O’Malley Corporation prepared the following reconciliation for its first year of operations:
Pretax financial income for 2008 $ 900,000
Tax exempt interest (75,000)
Originating temporary difference (225,000)
Taxable income $600,000
The temporary difference will reverse evenly over the next two years at an enacted tax rate of 40%. The enacted tax rate for 2008 is 35%.
63.What amount should be reported in its 2008 income statement as the deferred portion of the provision for income taxes? a. $90,000 debit
64.In O’Malley’s 2008 income statement, what amount should be reported for total income tax expense? a. $330,000
65.Jesse Company sells household furniture. Customers who purchase furniture on the installment basis make payments in equal monthly installments over a two-year period, with no down payment required. Jesse's gross profit on installment sales equals 40% of the selling price of the furniture.
For financial accounting purposes, sales revenue is recognized at the time the sale is made. For income tax purposes, however, the installment method is used. There are no other book and income tax accounting differences, and Jesse's income tax rate is 30%.
If Jesse's December 31, 2007, balance sheet includes a deferred tax liability of $300,000 arising from the difference between book and tax treatment of the installment sales, it should also include installment accounts receivable of a. $2,500,000.
66.Cromwell Company has the following cumulative taxable temporary differences:
The tax rate enacted for 2008 is 40%, while the tax rate enacted for future years is 30%. Taxable income for 2008 is $2,400,000 and there are no permanent differences. Cromwell's pretax financial income for 2008 is a. $3,750,000.
Use the following information for questions 67 through 69.
McGee Company deducts insurance expense of $84,000 for tax purposes in 2008, but the expense is not yet recognized for accounting purposes. In 2009, 2010, and 2011, no insurance expense will be deducted for tax purposes, but $28,000 of insurance expense will be reported for accounting purposes in each of these years. McGee Company has a tax rate of 40% and income taxes payable of $72,000 at the end of 2008. There were no deferred taxes at the beginning of 2008.
67.What is the amount of the deferred tax liability at the end of 2008?
68.What is the amount of income tax expense for 2008?
69.Assuming that income tax payable for 2009 is $96,000, the income tax expense for 2009 would be what amount? a. $129,600
Use the following information for questions 70 and 71.
Tyler Company made the following journal entry in late 2008 for rent on property it leases to Danford Corporation.
Unearned Rent 60,000
The payment represents rent for the years 2009 and 2010, the period covered by the lease. Tyler Company is a cash basis taxpayer. Tyler has income tax payable of $92,000 at the end of 2008, and its tax rate is 35%.
70.What amount of income tax expense should Tyler Company report at the end of 2008? a. $53,000