【正文】 i = 4%。s par value. D. Interest expense will have an upward trend for each period. C Bonds issued at a discount will have an original liability that is lower than the bond39。 I/Y=10/2。 PMT = 80/2。s deferred ine tax liabilities increased pared with those reported for 1999. Which of the following changes would cause this increase in deferred ine tax liabilities? A. An increase in prepaid utilities. B. An increase in rent receivable. C. An increase in warranty obligation. A. Both A and B. B. Both B and C. C. A only. D. C only. A Question ID: 14975 If timing differences that give rise to a deferred tax liability are not expected to reverse then the deferred tax: 21 A. should be carried forward to the next period until the reversal takes place. B. should be considered as a decrease or increase in equity. C. must be reduced by a valuation allowance. D. should be considered an asset or liability. B Question ID: 14997 A firm purchased a piece of equipment for $6000 with the following information provided: ? Revenue will increase by $15,000 per year. ? The equipment has a 3year life expectancy and no salvage value. ? The firm39。s ine tax expense for 1998 is: A. $0. B. $70. C. $50. D. $60. D [$150()] Setup Text: A pany purchased a new pizza oven directly from Italy for $12,676. It will work for 5 years and has no salvage value. The tax rate is 41 percent, and annual revenues are constant at $7,192. For financial reporting, the straightline depreciation method is used, but for tax 18 purposes depreciation is accelerated to 35 percent in years 1 and 2, and percent in year 3. For purposes of this exercise ignore all expenses other than depreciation. Question ID: 24682 What is the tax payable for year one? A. $1,626. B. $1,130. C. $779. D. $1,909. B Tax payable for year 1 will be $1,130 = [{$7,192 ($12,676 x .35)} x .41] Question ID: 24682 What is the deferred tax liability as of the end of year one? A. $1,129 B. $1,909 C. $320 D. $780 D The deferred tax liability for year 1 will be $780. Pretax Ine = $4,657 = ( $7,192 $2,535) Taxable Ine = $2,755 = ($7,192 $4,437) Deferred Tax liability = $780 = [($4,657 $2,755)(.41)] Question ID: 24682 What is the deferred tax liability as of the end of year three? 19 A. $2,079. B. $1,029. C. $1,909. D. $780. A The deferred tax liability at the end of year 3 will be $2,079 = ($780 + $780 + $519). Pretax Ine = $4,657 ( $7,192 $2,535) Taxable Ine = $3,389 [$7,192 ($12,676 x .30)] Deferred Tax liability for year 3 = $519 [($4,657 $3,389)(.41)] Deferred Tax liability for year 1 = $780 [($4,657 $2,755)(.41)] Deferred Tax liability for year 2 = $780 [($4,657 $2,755)(.41)] Question ID: 14985 An analyst gathered the following information about a pany: ? Pretax ine of $10,000 ? Taxes payable of $2,500 ? Deferred taxes of $500 ? Tax expense of $3,000 What is the firm39。s pretax financial statement ine was $400,000 and its taxable ine was $300,000. The difference is due to the following: Interest on municipal bonds $140,000 Premium expense on key person life insurance $(40,000) Total $100,000 Pick39。s equity. A For financial analysis, an analyst must decide on the appropriate treatment of deferred taxes on a casebycase basis. These can be classified as liabilities or stockholder’s equity, depending on various factors. Sometimes, deferred taxes are just ignored altogether. Question ID: 24715 Which of the following will NOT result in a permanent difference in taxable and pretax ine? A. Taxexempt interest expense. B. Goodwill amortization. C. Taxexempt interest revenue. D. Post retirement benefit expense. D The post retirement benefits will not result in a permanent difference. However, a temporary difference will result if the benefit in pretax ine exceeds that allowed for by a deduction on the tax return. Taxexempt interest expense and revenue, as well as goodwill amortization are all recognized on financial statements but do not affect tax returns and will result in permanent differences. 11 Question ID: 24721 Permanent differences in taxable and pretax ine: A. can be deferred in some cases. B. are reported on both tax returns and financial statements. C. are considered as changes in the effective tax rate. D. are reported on tax returns only. C The permanent differences are never deferred but are considered increases or decreases in the effective tax rate. If the only difference between the taxable and pretax ines were a permanent difference, then tax expense would simply be taxes payable. Question ID: 24725 Temporary differences in taxable and pretax ine: A. result only in current deferred tax assets and liabilities. B. will always be reversed. C. may result in lower current taxes payable and higher future taxes payable. D. are not reported on the balance sheet. C Temporary differences will result in current lower (higher) taxes payable and future higher (lower) taxes payable. These differences will be categorized as deferred tax assets and liabilities and will be stated on the balance sheet. The temporary differences must be reversed, but in some cases management does have discretion over the time and amount of reversal. Question ID: 14976 Temporary differences arise when expenses are deductible for tax purposes: 12 A. After They are Recognized in Ine Statement Before They are Recognized in Ine Statement Yes Yes B. After They are Recognized in Ine Statement Before They are Recognized in Ine Statement No Yes C. After They are Recognized in Ine Statement Before They are Recognized in Ine Statement Yes No D.