Question

1.Recognition of tax benefits in the loss year due to a loss carryforward requires:

Select one:

a. The establishment of a deferred tax liability

b. The establishment of a deferred tax asset

c. The establishment of an income tax refund receivable

d. Only a note to the financial statements

2.

Benton Company issues $10,000,000 of 10-year, 9% bonds on April 1, 2017 at 95 plus accrued interest. The bonds are dated January 1, 2017, and pay interest on June 30 and December 31. What is the total cash received on the issue date?

Select one:

a. $9,500,000

b. $9,950,000

c. $9,725,000

d. $9,766,667

e. $10,400,000

Answer 1

Answer. 1

Recognition of tax benefits in the loss year due to a loss carryforward requires:

a. The establishment of a deferred tax liability

Items on a company's balance sheet that may be used to reduce taxable income in the future are called deferred tax assets. The situation can happen when a business overpaid taxes or paid taxes in advance on its balance sheet. These taxes are eventually returned to the business in the form of tax relief.

Therefore, overpayment is considered an asset to the company. A deferred tax asset is the opposite of a deferred tax liability, which can increase the amount of income tax owed by a company.
Hence, Incase of Deffered Assets already shown in balance sheet of a company, recognition can be done in a loss year also.

2. Correct option is - c. $9725000

Issue price= $10000000 * 95% = $ 9500000

Interest accrued for 3 months = 10000000*9%*3/12

=$9725000