- (TCO B) Zeff Co. prepared the following reconciliation of its pretax financial statement income to taxable income for the year ended December 31, Year 1, its first year of operations:
- (TCO B) Thorn Co. applies Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes. At the end of Year 1, the tax effects of temporary differences were as follows:
tax assets Related asset
Accelerated tax depreciation ($75,000) Noncurrent asset
Additional costs in inventory for tax purposes 25,000 Current asset
A valuation allowance was not considered necessary. Thorn anticipates that $10,000 of the deferred tax liability will reverse in Year 2. In Thorn's December 31, Year 1, balance sheet, what amount should Thorn report as noncurrent deferred tax liability under U.S. GAAP?
- (TCO B) Justification for the method of determining periodic deferred tax expense is based on the concept of:
- (TCO B) In Year 2, Ajax, Inc. reported taxable income of $400,000 and pretax financial statement income of $300,000. The difference resulted from $60,000 of nondeductible premiums on Ajax's officers' life insurance and $40,000 of rental income received in advance. Rental income is taxable when received. Ajax's effective tax rate is 30%. In its Year 2 income statement, what amount should Ajax report as income tax expense-current portion?
- (TCO B) When accounting for income taxes, a temporary difference occurs in which of the following scenarios?