10. Which of the following creates a temporary tax difference in the recognition of deferred income...
10. Which of the following creates a temporary tax difference in the recognition of deferred income taxes ?
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The payment of federal income taxes |
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The receipt by a corporation of cash dividends from another domestic corporation |
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Use of the installment sales method for tax reporting purposes |
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The collection of life insurance on the death of an individual |
11. At the end of Year One, Omaka Corporation is preparing its balance sheet. Depreciation of the company's equipment has created a $200,000 temporary difference for tax purposes. Because of the large amount of depreciation that was deducted this year for tax purposes, the company will have a $150,000 smaller deduction in Year Two than for financial reporting and a $50,000 smaller deduction in Year Three.
Omaka also has a second temporary difference. This one is also for $200,000 but results from a warranty that was given out to customers. In Year Two, Omaka expects to have $140,000 more warranty expense for tax purposes than for financial reporting. In Year Three, the warranty for tax purposes is expected to be $60,000 higher than for financial reporting.
Assume a tax rate of 20 percent. What is reported for deferred taxes on the company's balance sheet
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A current deferred income tax asset of $28,000 is reported as well as a noncurrent deferred income tax liability of $28,000 |
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Nothing is reported because the amounts offset each other |
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A current deferred income tax asset of $40,000 is reported as well as a noncurrent deferred income tax liability of $40,000 |
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A current deferred income tax asset of $2,000 is reported as well as a noncurrent deferred income tax liability of $2,000 |
12. A publicly-owned company reports net income of $900,000 and pays a $200,000 dividend on its common stock and a $100,000 dividend on its preferred stock. The company started the year with 20,000 shares of preferred stock outstanding but issued an additional 8,000 shares on July 1. The company started the year with 100,000 shares of common stock outstanding but issued an additional 20,000 shares on July 1. The company had nothing outstanding during the year that could be converted into common stock. What should be reported as earnings per share ?
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$5.00 |
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$6.72 |
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$7.27 |
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$5.45 |
13. A company reports net income in the current year of $600,000. During the year, the company declares and pays $20,000 in cash dividends on its common stock and $80,000 in dividends on its convertible preferred stock. The company has 20,000 shares of the preferred stock outstanding all year and each is convertible into three shares of common stock. The company starts the year with 170,000 shares of common stock outstanding. On July 1 of that year, 20,000 additional shares of common stock were issued as a stock dividend so that the company had 190,000 shares for the last six months of the year. What should the company report as its basic earnings per share figure (rounded) ?
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$2.74 |
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$2.63 |
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$2.78 |
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$2.89 |
Homework Answers
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