Question 1.1. (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:
Pretax financial income
$160,000
Nontaxable interest received on municipal securities
(5,000)
Long-term loss accrual in excess of deductible amount 10,000
Depreciation in excess of financial statement amount (25,000)
Taxable income
$140,000
Zeff's tax rate for Year 1 is 40%.
In its December 31, Year 1, balance sheet, what should Zeff report as deferred income tax
liability? (Points : 5)
$2,000
$4,000
$6,000
$8,000

Question 2.2. (TCO B) Mobe Co. reported the following operating income (loss) for its first three years

of operations:
Year 1 $
300,000
Year 2
(700,000)
Year 3
1,200,000
For each year, there were no deferred income taxes (before Year 1), and Mobe's effective income tax
rate was 30%. In its Year 2 income tax return, Mobe elected the two year carry back of the loss. In its
Year 3 income statement, what amount should Mobe report as total income tax expense? (Points : 5)
$120,000
$150,000
$240,000
$360,000

Question 3.3. (TCO B) Hut Co. has temporary taxable differences that will reverse during the next year

and add to taxable income. These differences relate to noncurrent assets. Under U.S. GAAP, deferred
income taxes based on these temporary differences should be classified in Hut's balance sheet as
a: (Points : 5)
Current asset.
Noncurrent asset.

Current liability.
Noncurrent liability.

Question 4.4. (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? (Points : 5)
$90,000
$102,000
$108,000
$120,000

Question 5.5. (TCO B) Stone Co. began operations in Year 1 and reported $225,000 in income before

income taxes for the year. Stone's Year 1 tax depreciation exceeded its book depreciation by $25,000.
Stone also had nondeductible book expenses of $10,000 related to permanent differences. Stone's tax
rate for Year 1 was 40%, and the enacted rate for years after Year 1 is 35%. In its December 31, Year 1,
balance sheet, what amount of deferred income tax liability should Stone report? (Points : 5)
$8,750
$10,000
$12,250
$14,000