1. Woody Corp. had taxable income of $8,000 in the current year. The amount of MACRS depreciation was $3,000 while the amount of depreciation reported in the income statement was $1,000. Assuming no other differences between tax and accounting income, Woody’s pretax accounting income was
2.JL Health Services reported a net loss-AOCI in last year’s balance sheet. This year, the company revised its estimate of future salary levels causing its PBO estimate to decline by $24. Also, the $48 million actual return on plan assets was less than the $54 million expected return. As a result,
A. the net pension liability will decrease by $24 million.
B. the net pension liability will increase by $18 million.
C. the statement of comprehensive income will report a $6 million gain and a $24 million loss.
D. accumulated other comprehensive income will increase by $18 million.
3. In 2009, Winn, Inc., issued $1 par value common stock for $35 per share. No other common stock transactions occurred until July 31, 2011, when Winn acquired some of the issued shares for $30 per share and retired them. Which of the following statements correctly states an effect of this acquisition and retirement?
A. Retained earnings is increased.
B. 2011 net income is increased.
C. 2011 net income is decreased.
D. Additional paid-in capital is decreased.
4. Roberto Corporation was organized on January 1, 2011. The firm was authorized to issue 100,000 shares of $5 par common stock. During 2011, Roberto had the following transactions relating to shareholders’ equity:
Issued 10,000 shares of common stock at $7 per share.
Issued 20,000 shares of common stock at $8 per share.
Reported a net income of $100,000.
Paid dividends of $50,000.
Purchased 3,000 shares of treasury stock at $10 (part of the 20,000 shares issued at $8).
What is total shareholders’ equity at the end of 2011?
6.At the end of the current year, Newsmax Inc. has $400,000 of subscriptions received in advance included in its balance sheet. A footnote reveals that the entire $400,000 will be earned in the next year. In the absence of other temporary differences, in the balance sheet one would also expect to find a
A. Noncurrent deferred tax asset
B. Current deferred tax liability
C. Current deferred tax asset
D. Noncurrent deferred tax liability
7. Giada Foods reported $940 million in income before income taxes for 2011, its first year of operations. Tax depreciation exceeded depreciation for financial reporting purposes by $100 million. The company also had non-tax-deductible expenses of $80 million relating to permanent differences. The income tax rate for 2011 was 35%, but the enacted rate for years after 2011 is 40%. The balance in the deferred tax liability in the December 31, 2011, balance sheet is
A. $40 million.
B. $56 million.
C. $16 million.
D. $35 million.
9. Montgomery & Co., a well established law firm, provided 500 hours of its time to Fink Corporation in exchange for 1,000 shares of Fink’s $5 par common stock. Mitchell’s usual billing rate is $700 per hour, and Fink’s stock has a book value of $250 per share. By what amount will Fink’s Paid-in capital – excess of par increase for this transaction?
10. At the beginning of 2009, Emily Corporation issued 10,000 shares of $100 par, 5%, cumulative, preferred stock for $110 per share. No dividends have been paid to preferred shareholders. What amount of dividends will a shareholder owning 100 shares receive in 2011 if Emily pays $1,000,000 in dividends?
11. Lucid Company declared a property dividend of 20,000 shares of $1 par Polk Company common stock. The Polk stock was purchased for $5 per share. Market value was $10 per share on the declaration date and $11 per share on the distribution date. What is the amount of the dividend?
12.Beagle Corporation has 20,000 shares of $10 par common stock outstanding and 10,000 shares of $100 par, 6% cumulative, nonparticipating preferred stock outstanding. Dividends haven’t been paid for the past two years. This year, a $300,000 dividend will be paid. What are the dividends per share payable to preferred and common, respectively?
A. $18; $6
B. $12; $0
C. $6; $6
D. $6; $12
13. Louie Company has a defined benefit pension plan. On December 31 (the end of the fiscal year), the company received the PBO report from the actuary. The following information was included in the report: ending PBO, $110,000; benefits paid to retirees, $10,000; interest cost, $8,000. The discount rate applied by the actuary was 8%. What was the service cost for the year?
14. The changes in account balances for Allen Inc. for 2011 are as follows:
Assets $225,000 debit
Common stock 125,000 credit
Liabilities 80,000 credit
Paid-in capital–excess of par 15,000 credit
Assuming the only changes in retained earnings in 2011 were for net income and a $25,000 dividend, what was net income for 2011?
15. Alamo, Inc., had $300 million in taxable income for the current year. Alamo also had a decrease in deferred tax assets of $30 million and an increase in deferred tax liabilities of $60 million. The company is subject to a tax rate of 40%. The total income tax expense for the year was
A. $150 million.
B. $180 million.
C. $ 390 million.
D. $210 million.
16. For the current year ($ in millions), Centipede Corp. had $80 in pretax accounting income. This included bad debt expense of $6 based on the allowance method, and $20 in depreciation expense. Two million in receivables were written off as uncollectible, and MACRS depreciation amounted to $35. In the absence of other temporary or permanent differences, what was Centipede’s income tax payable currently, assuming a tax rate of 40%?
A. 29.2 million
B. 27.6 million
C. 25.2 million
D. 19.6 million
17. The EPBO for a particular employee on January 1, 2011, was $150,000. The APBO at the beginning of the year was $30,000. The appropriate discount rate for this postretirement plan is 5%. The employee is expected to serve the company for a total of twenty-five years, with five of those years already served as of January 1, 2011. What is the APBO at December 31, 2011?
18. In 2010, HD had reported a deferred tax asset of $90 million with no valuation allowance. At December 31, 2011, the account balances of HD Services showed a deferred tax asset of $120 million before assessing the need for a valuation allowance and income taxes payable of $80 million. HD determined that it was more likely than not that 30% of the deferred tax asset ultimately would not be realized. HD made no estimated tax payments during 2011. What amount should HD report as income tax expense in its 2011 income statement?
A. $86 million
B. $50 million
C. $80 million
D. $116 million
20. A reconciliation of pretax financial statement income to taxable income is shown below for Fieval Industries for the year ended December 31, 2011, its first year of operations. The income tax rate is 40%.
Pretax accounting income (income statement) $300,000
Interest revenue on municipal securities (15,000)
Warranty expense in excess of deductible amount 25,000
Depreciation in excess of financial statement amount (70,000)
Taxable income (tax return) $240,000
What amount(s) should Fieval report related to deferred income taxes in its 2011 balance sheet?
A. Current asset of $4,000 and noncurrent liability of $28,000
B. Noncurrent liability of $18,000
C. Current asset of $10,000 and noncurrent liability of $28,000
D. Noncurrent liability of $24,000