81.Eddy Corp.'s 2008 income statement showed pretax accounting income of $750,000. To compute the federal income tax liability, the following 2008 data are provided:

Income from exempt municipal bonds $  30,000

Depreciation deducted for tax purposes in excess of depreciation

deducted for financial statement purposes 60,000 Estimated federal income tax payments made 150,000

Enacted corporate income tax rate 30%

What amount of current federal income tax liability should be included in Eddy's December 31, 2008 balance sheet? a. $48,000




82.On January 1, 2007, Lebo, Inc. purchased a machine for $720,000 which will be depreciated $72,000 per year for financial statement reporting purposes. For income tax reporting, Lebo elected to expense $80,000 and to use straight-line depreciation which will allow a cost recovery deduction of $64,000 for 2007. Assume a present and future enacted income tax rate of 30%. What amount should be added to Lebo's deferred income tax liability for this temporary difference at December 31, 2007? a. $43,200




83.On January 1, 2007, Magee Corp. purchased 40% of the voting common stock of Reed, Inc. and appropriately accounts for its investment by the equity method. During 2007, Reed reported earnings of $360,000 and paid dividends of $120,000. Magee assumes that all of Reed's undistributed earnings will be distributed as dividends in future periods when the enacted tax rate will be 30%. Ignore the dividend-received deduction. Magee's current enacted income tax rate is 25%. The increase in Magee's deferred income tax liability for this temporary difference is a. $72,000.




84.Brock Corp.'s 2007 income statement had pretax financial income of $250,000 in its first year of operations. Brock uses an accelerated cost recovery method on its tax return and straight-line depreciation for financial reporting. The differences between the book and tax deductions for depreciation over the five-year life of the assets acquired in 2007, and the enacted tax rates for 2007 to 2011 are as follows:

Book Over (Under) Tax Tax Rates

2007 $(50,000) 35% 2008 (65,000) 30%

2009(15,000) 30%

201060,000 30%

201170,000 30%

There are no other temporary differences. In Brock's December 31, 2007 balance sheet, the

noncurrent deferred income tax liability and the income taxes currently payable should be

Noncurrent Deferred   Income Taxes

Income Tax Liability Currently Payable

a.$39,000 $50,000

b.$39,000 $70,000

c.$15,000 $60,000

d.$15,000 $70,000

85.Foyle Corp. prepared the following reconciliation of income per books with income per tax return for the year ended December 31, 2008:

Book income before income taxes $1,200,000

Add temporary difference

Construction contract revenue which will reverse in 2009 160,000

Deduct temporary difference

Depreciation expense which will reverse in equal amounts in

each of the next four years (640,000)

Taxable income $720,000

Foyle's effective income tax rate is 34% for 2008. What amount should Foyle report in its 2008 income statement as the current provision for income taxes? a. $54,400




86.In its 2007 income statement, Hertz Corp. reported depreciation of $1,110,000 and interest revenue on municipal obligations of $210,000. Hertz reported depreciation of $1,650,000 on its 2007 income tax return. The difference in depreciation is the only temporary difference, and it will reverse equally over the next three years. Hertz's enacted income tax rates are 35% for 2007, 30% for 2008, and 25% for 2009 and 2010. What amount should be included in the deferred income tax liability in Hertz's December 31, 2007 balance sheet? a. $144,000




87.Karr, Inc. uses the accrual method of accounting for financial reporting purposes and appropriately uses the installment method of accounting for income tax purposes. Installment income of $900,000 will be collected in the following years when the enacted tax rates are:

Collection of Income          Enacted Tax Rates

2007 $  90,000 35% 2008 180,000 30%

2009270,000 30%

2010360,000 25%

The installment income is Karr's only temporary difference. What amount should be included in the deferred income tax liability in Karr's December 31, 2007 balance sheet? a. $225,000




88.For calendar year 2007, Neer Corp. reported depreciation of $1,200,000 in its income statement. On its 2007 income tax return, Neer reported depreciation of $1,800,000. Neer's income statement also included $225,000 accrued warranty expense that will be deducted for tax purposes when paid. Neer's enacted tax rates are 30% for 2007 and 2008, and 24% for 2009 and 2010. The depreciation difference and warranty expense will reverse over the next three years as follows:

Depreciation Difference Warranty Expense

2008$240,000 $  45,000

2009210,000 75,000

2010150,000   105,000

$600,000 $225,000

These were Neer's only temporary differences. In Neer's 2007 income statement, the deferred portion of its provision for income taxes should be a. $200,700.




89.Nevitt Co., organized on January 2, 2007, had pretax accounting income of $880,000 and taxable income of $1,600,000 for the year ended December 31, 2007. The only temporary difference is accrued product warranty costs which are expected to be paid as follows:

2008 $240,000 2009 120,000



The enacted income tax rates are 35% for 2007, 30% for 2008 through 2010, and 25% for 2011. If Nevitt expects taxable income in future years, the deferred tax asset in Nevitt's December 31, 2007 balance sheet should be a. $144,000.






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