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     65.     Jesse Company sells household furniture. Customers who purchase furniture on the installment basis make payments in equal monthly installments over a two-year period, with no down payment required. Jesse's gross profit on installment sales equals 40% of the selling price of the furniture.
For financial accounting purposes, sales revenue is recognized at the time the sale is made. For income tax purposes, however, the installment method is used. There are no other book and income tax accounting differences, and Jesse's income tax rate is 30%.
If Jesse's December 31, 2007, balance sheet includes a deferred tax liability of $300,000 arising from the difference between book and tax treatment of the installment sales, it should also include installment accounts receivable of
a.     $2,500,000.
b.     $1,000,000.
c.     $750,000.
d.     $300,000.

     66.     Cromwell Company has the following cumulative taxable temporary differences:
      12/31/08           12/31/07
     $1,350,000          $960,000
The tax rate enacted for 2008 is 40%, while the tax rate enacted for future years is 30%. Taxable income for 2008 is $2,400,000 and there are no permanent differences. Cromwell's pretax financial income for 2008 is
a.     $3,750,000.
b.     $2,790,000.
c.     $2,010,000.
d.     $1,050,000.

Use the following information for questions 67 through 69.

McGee Company deducts insurance expense of $84,000 for tax purposes in 2008, but the expense is not yet recognized for accounting purposes. In 2009, 2010, and 2011, no insurance expense will be deducted for tax purposes, but $28,000 of insurance expense will be reported for accounting purposes in each of these years. McGee Company has a tax rate of 40% and income taxes payable of $72,000 at the end of 2008. There were no deferred taxes at the beginning of 2008.

     67.     What is the amount of the deferred tax liability at the end of 2008?
a.     $33,600
b.     $28,800
c.     $12,000
d.     $0

     68.     What is the amount of income tax expense for 2008?
a.     $105,600
b.     $100,800
c.     $84,000
d.     $72,000


     69.     Assuming that income tax payable for 2009 is $96,000, the income tax expense for 2009 would be what amount?
a.     $129,600
b.     $107,200
c.     $96,000
d.     $84,800

Use the following information for questions 70 and 71.

Tyler Company made the following journal entry in late 2008 for rent on property it leases to Danford Corporation.
Cash          60,000
     Unearned Rent          60,000
The payment represents rent for the years 2009 and 2010, the period covered by the lease. Tyler Company is a cash basis taxpayer. Tyler has income tax payable of $92,000 at the end of 2008, and its tax rate is 35%.

     70.     What amount of income tax expense should Tyler Company report at the end of 2008?
a.     $53,000
b.     $71,000
c.     $81,500
d.     $113,000

     71.     Assuming the taxes payable at the end of 2009 is $102,000, what amount of income tax expense would Tyler Company record for 2009?
a.     $81,000
b.     $91,500
c.     $112,500
d.     $123,000

     72.     The following information is available for Nielsen Company after its first year of operations:
Income before taxes     $250,000
Federal income tax payable     $104,000
Deferred income tax      (4,000)
Income tax expense      100,000
Net income     $150,000
Nielsen estimates its annual warranty expense as a percentage of sales. The amount charged to warranty expense on its books was $95,000. Assuming a 40% income tax rate, what amount was actually paid this year for warranty claims?
a.     $105,000
b.     $100,000
c.     $95,000
d.     $85,000


     73.     Meyers Co. had a deferred tax liability balance due to a temporary difference at the beginning of 2007 related to $600,000 of excess depreciation. In December of 2007, a new income tax act is signed into law that lowers the corporate rate from 40% to 35%, effective January 1, 2009. If taxable amounts related to the temporary difference are scheduled to be reversed by $300,000 for both 2008 and 2009, Meyers should increase or decrease deferred tax liability by what amount?
a.     Decrease by $30,000
b.     Decrease by $15,000
c.     Increase by $15,000
d.     Increase by $30,000

     74.     A reconciliation of Reaker Company's pretax accounting income with its taxable income for 2008, its first year of operations, is as follows:
Pretax accounting income     $3,000,000
Excess tax depreciation      (90,000)
Taxable income     $2,910,000
The excess tax depreciation will result in equal net taxable amounts in each of the next three years. Enacted tax rates are 40% in 2008, 35% in 2009 and 2010, and 30% in 2011. The total deferred tax liability to be reported on Reaker's balance sheet at December 31, 2008, is
a.     $36,000.
b.     $30,000.
c.     $31,500.
d.     $27,000.

     75.     Mast, Inc. reports a taxable and financial loss of $650,000 for 2008. Its pretax financial income for the last two years was as follows:
2006     $300,000
2007     400,000
The amount that Mast, Inc. reports as a net loss for financial reporting purposes in 2008, assuming that it uses the carryback provisions, and that the tax rate is 30% for all periods affected, is
a.     $650,000 loss.
b.     $ -0-.
c.     $195,000 loss.
d.     $455,000 loss.

Use the following information for questions 76 and 77.

Neasha Corporation reported the following results for its first three years of operation:
2006 income (before income taxes)     $ 100,000
2007 loss (before income taxes)     (900,000)
2008 income (before income taxes)     1,000,000
There were no permanent or temporary differences during these three years. Assume a corporate tax rate of 30% for 2006 and 2007, and 40% for 2008.


     76.     Assuming that Neasha elects to use the carryback provision, what income (loss) is reported in 2007? (Assume that any deferred tax asset recognized is more likely than not to be realized.)
a.     $(900,000)
b.     $ -0-
c.     $(870,000)
d.     $(550,000)

     77.     Assuming that Neasha elects to use the carryforward provision and not the carryback provision, what income (loss) is reported in 2007?
a.     $(900,000)
b.     $(540,000)
c.     $ -0-
d.     $(870,000)

     78.     Peck Co. reports a taxable and pretax financial loss of $400,000 for 2008. Peck's taxable and pretax financial income and tax rates for the last two years were:
2006     $400,000     30%
2007     400,000     35%
The amount that Peck should report as an income tax refund receivable in 2008, assuming that it uses the carryback provisions and that the tax rate is 40% in 2008, is
a.     $120,000.
b.     $140,000.
c.     $160,000.
d.     $180,000.

     79.     Bennington Corporation began operations in 2004. There have been no permanent or temporary differences to account for since the inception of the business. The following data are available:
Year
2006
2007
2008
2009     Enacted Tax Rate
45%
40%
35%
30%     Taxable Income
$750,000
900,000     Taxes Paid
$337,500
360,000
In 2008, Bennington had an operating loss of $930,000. What amount of income tax benefits should be reported on the 2008 income statement due to this loss?
a.     $409,500
b.     $373,500
c.     $372,000
d.     $279,000

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