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Questions and problems
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Questions and problems
Questions and problems
Questions and problems
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QUESTIONS AND ANSWERS
NAME
INSTITUTION
DATE
Running head/questions and answers
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1. Woodward Corporation reported pretax book income of $1,000,000. Included in the
computation were favorable temporary differences of $200,000, unfavorable temporary
differences of $50,000, and favorable permanent differences of $100,000. Assuming a tax
rate of 34 percent, compute the company’s current income tax expense or benefit
Pre-tax book income = $1,000,000
Favorable temporary differences= $200,000
Unfavorable temporary differences = $50,000
Favorable permanent differences =$100,000
Taxable income =$750,000
Tax rate= 34%
34% * $750,000
Current income tax expense= $255,000
2. Cass Corporation reported pretax book income of $10,000,000. During the current year, the
reserve for bad debts increased by $100,000. In addition, tax depreciation exceeded book
depreciation by $200,000. Cass Corporation sold a fixed asset and reported book gain of $50,000
and tax gain of $75,000. Finally, the company received $250,000 of tax-exempt life insurance
proceeds from the death of one of its officers. Assuming a tax rate of 34 percent, compute the
company’s current income tax expense or benefit
Running head/questions and answers
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Pre-tax book income= $10,000,000
Increase in bad debt reserve= $100,000
Excess tax depreciation= $200,000
Excess tax over book gain= $25,000
Tax-exempt life insurance proceeds= $250,000
Taxable income= $9,675,000
Tax rate= 34%
Current income tax expense= 34% * $9,675,000
= %3,289,5000
3. Adams Corporation has total deferred tax assets of $3,000,000 at year-end. Management is
assessing whether a valuation allowance must be recorded against some or all of the deferred tax
assets. What level of assurance must management have, based on the weight of available
evidence, that some or all of the deferred tax assets will not be realized before a valuation
allowance is required?
A. Probable.
b. More likely than not.
c. Realistic possibility.
d. Reasonable.
Running head/questions and answers
e. More than remote.
Answer is b. more likely than not
4. Which of the following evidenc...