Question

Assume the applicable statutory rate for Courtney Co. is 40%. XYZ has income before taxes of $800,000. The Company's Income Statement includes a deduction for lobbying of 20,000 that is permanently not deductible for tax purposes and the tax return allows $150,000 more in depreciation deductions then what was an expense on the income statement. What is Courtney's net income if there are no discontinued operations?

$472,000

$480,000

$532,000

$540,000

None of the above

2- Curry Co. has several deferred tax balances on their balance sheet: $100,000 deferred tax asset related to bad debt expense; $600,000 deferred tax liability related to depreciation; $200,000 deferred tax asset related to a net operating loss, which is expected to reverse in the next 12 months. What categories of deferred tax assets/liabilities will the Company have on its balance sheet?

Current deferred tax assets

Non current deferred tax asset

Current deferred tax assets and non current deferred tax liability

Non current deferred tax liability

None of the above

3- Santiago, Inc.. incurred their first loss during this fiscal year on both their financial statements and tax returns. Suppose there are no differences between the calculation of book income and taxable income. The net loss this year was $1,000,000, prior year's income was $12,000,000 and the applicable tax rate was 40%. What would the entry be if the government(s) allowed the Company to carry a tax loss back to prior tax years for a full refund of prior taxes paid?

DR Deferred tax asset $400K, CR Tax benefit (provision) $400K

DR Current tax receivable $400K, CR Tax benefit (provision) $400K

DR Tax expense (provision) $400K, CR Current taxes payable $400K

DR Tax expense (provision) $400K, CR Deferred tax liability $400K

DR Current tax expense $400K, CR Deferred tax expense $400K

Answer 1

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