Question

20.Which of the following usually results in an increase in a deferred tax asset?

Multiple Choice

• Installment sales for which taxable income recognized when cash is collected.
• Unrealized loss from recording inventory impairments.
• None of these answer choices are correct.
• Unrealized gain from recording investments at fair value.

27.Illini switched from the sum-of-the-years-digits depreciation method to straight-line depreciation in 2018. The change affects a tool purchased at the beginning of 2016 at a cost of $79,200. The tool has an estimated life of five years and an estimated residual value of $3,960. What is Illini's depreciation expense on the tool in 2018?

Multiple Choice

• $20,064.
• $10,032.
• $21,120.
• $15,048.

Answer 1

Answer 20

Correct answer is Unrealized gain from recording investments at fair value.

Unrealized gain from recording investment at fair value increase a deferred tax asset as it creates a temporary difference as per tax books and account books and we pay higher tax in accounts books.

Answer 27

Correct answer is $10,032

Depreciation in 2016=(79,200-3,960)*5/(5+4+3+2+1)

=75,240*5/15

Depreciation in 2016=$25,080

Depreciation in 2017=$75,240*4/15

Depreciation in 2017=$20,064

Carrying value of asset in starting of 2018=$79,200-$25,080-$20,064=$34,056

Depreciation for 2018=(Carrying value-Residual value)/Remaining useful life

=(34,056-3,960)/3

Depreciation for 2018=$10,032