Baruch College – CUNY
Stan Ross Department of Accountancy
Accountancy 3100 - Section TR74 – A
Fall 2003 – Prof Jan Sweeney
Quiz3 -Solution All $ in ‘000s
Question 1 (18 points)
1. $600
* .3 = $180
2. $1,000
* .3 = $300
3. $800
* .3 = $240
4. $400*.3
=$120
5. Provision for Income
Taxes or Income Tax Expense ($400*.3) $120
Deferred Tax Asset (LT) 300
Deferred
Tax Liability (Current) $120
Deferred
Tax Liability (LT) $120
Income Taxes Payable (Cash) 180
6
Provision for Income Taxes or
Income Tax Expense ($700*.3) $210
Deferred
Tax Liability ($400*.3) 120
Income
Taxes Payable or Cash) ($1,100 *.3) 330
7. Asset = $300 – Liability $120 = $180 net asset
Question 3 (18points)
1.
a. Tax refund ($80*.3) + ($40*.2) = $32
b. Tax
benefit c/f (($390 - $120) * .4) = $108
c. Loss = $390 –$140
=$250
d. Provision for Income
Taxes or Income Tax Expense
($500*.4) $200
Deferred Tax Asset $108
Income
Taxes Payable or Cash) ($1,000 *.3) 92
2. a .Loss = $390 – Tax benefit (($390 * .4) $156 =
$234
b. Provision for Income Taxes or Tax
Loss Benefit $31.2
Allowance
to reduce Deferred Tax Asset (NOL)
to
Net realizable value $31.2
c.
Provision for Income Taxes or Income Tax Expense
($500*.4) $200
Allowance to reduce Deferred Tax Asset (NOL) 31.2
to
net realizable value
Deferred Tax Asset $156
Income
Taxes Payable or Cash 76.2
Question
3 (4 points)
ANS
= 0 Fines which are non deductible for tax purposes are a permanent, not a
temporary difference, therefore no asset or liability will be accrued.
Baruch College – CUNY
Stan Ross Department of Accountancy
Accountancy 3100 - Section TR74 – B
Fall 2003 – Prof Jan Sweeney
Quiz3 - Solution All $ in ‘000s
Question
1 (18 points)
1. $100
* .3 = $30
2. $1,800
* .3 = $540
3. $1,800 * .3 = $540 All of the tax liability resulting from
depreciation on LT is LT
4. $1,000
*.3 = $300
5. Provision for Income
Taxes or Income Tax Expense ($9400*.3) $270
Deferred
Tax Asset (LT) 300
Deferred
Tax Liability (LT) $
540
Income Taxes Payable (Cash) 30
6
Provision for Income Taxes or
Income Tax Expense ($400*.3) $120
Deferred
Tax Liability ($600*.3) 180
Income
Taxes Payable or Cash) ($1,000 *.3) $300
7. Asset = $300 – Liability $360 = $60 net liability
Question 2 (18 points)
1.
a. Tax refund ($20*.2) + ($60*.3) = $22
b. Tax
benefit c/f (($540 - $80) * .4) = $184
c. Loss = $540 –$206
=$334
d Provision
for Income Taxes or Income Tax Expense
($600*.4) $240
Deferred Tax Asset $184
Income
Taxes Payable or Cash) ($1,000 *.3) 56
1.
a. Loss = $540 – Tax benefit ($540 * .4) $216 = $324
b. Provision for Income Taxes or Tax Loss
Benefit $43.2
Allowance
to reduce Deferred Tax Asset (NOL)
to
Net realizable value
$43.2
c. There was a typo in the
original answer and Christina Lin proposed the following solution which is
actually better than the one I gave
Provision for Income Taxes or Income Tax Expense ($500*.4) $200
Deferred
Tax Asset $200
Allowance
to reduce Deferred Tax Asset (NOL)
to
net realizable value $27.2
Provision for Income Taxes or Benefit due to NOL $27.2
Which
can be reduced to:
. Provision for Income Taxes $172.8
Allowance to reduce Def Tax A to NRV 27.2
Deferred Tax Asset $200
Question
3 (4 points)
ANS
= 0 Fines which are non deductible for tax purposes are a permanent, not a
temporary difference, therefore no asset or liability will be accrued
Baruch College – CUNY
Stan Ross Department of Accountancy
Accountancy 3100 - Section TR74 – C
Fall
2003 – Prof Jan Sweeney
Quiz3 Solution All $ in ‘000s
Question 1 (18 points)
1. $800
* .4 = $320
2. $1,200
* .4 = $480
3. $600
* .4 = $240
2.
$1,600 * .4 = $640
5. Provision for Income
Taxes or Income Tax Expense ($400*.4) $160
Deferred Tax Asset (LT) 640
Deferred
Tax Liability (ST) $240
Deferred
Tax Liability (LT) $240
Income
Taxes Payable (Cash) 320
6
Provision for Income Taxes or Income
Tax Expense ($500*.4) $200
Deferred
Tax Liability ($400*.4) 240
Income
Taxes Payable or Cash) ($1,100 *.4) 440
7. Asset $640 – Liability $240 = $400 net asset
Question
2 (4 points)
Ans
= 0 There is no deferred tax asset
or liability because the income from the municipal income is never taxable and
constitutes a permanent difference
Question
1 (18 points)
1. a. Tax refund ($200*.25) + ($300*.3) = $140
b. Tax benefit c/f (($800 -
$500) * .4) = $120
c.
Loss = $800 –$260 =$540
d. Provision for Income
Taxes or Income Tax Expense ($400*.4) $160
Deferred Tax Asset $120
Income
Taxes Payable or Cash) 40
2. a. Loss
= $800 – Tax benefit ($800 * .4) $320 =
$480
b.
Provision for Income Taxes or Tax Loss Benefit $96
Allowance
to reduce Deferred Tax Asset (NOL)
to
Net realizable value
$96
c.
Provision for Income Taxes or Income Tax Expense ($400*.4) $160
Deferred
Tax Asset $160
The
allowance account in unaffected because 2005 income does not exceed 04 loss
Baruch College – CUNY
Stan Ross Department of Accountancy
Accountancy 3100 - Section TR74 – D
Fall 2003 – Prof Jan Sweeney
Quiz3 – Solution All $ in ‘000s
Question
1 (18 points)
1. $700
* .4 = $280
2. $1,000
* .4 = $400
3. $1,200
* .4 = $480
4. -0- All of the tax liability resulting from
depreciation on LT is LT
5. Provision for Income
Taxes or Income Tax Expense ($900*.4) $360
Deferred Tax Asset (LT) 400
Deferred
Tax Liability $480
Income
Taxes Payable (Cash) 280
6
Provision for Income Taxes or
Income Tax Expense ($800*.4) $320
Deferred Tax Liability ($400*.4) 160
Income
Taxes Payable or Cash) ($1,200 *.4) 480
7. Asset = $400 – Liability ($480 - $160) $320 = $80 net asset
Question 2 (4 points)
Ans
= 0 There is no deferred tax asset
or liability because the income from the municipal income is never taxable and
constitutes a permanent difference
Question 3
(18 points)
1.
a. Tax refund ($20*.2) + ($60*.3) = $22
b. Tax
benefit c/f (($540 - $80) * .4) = $184
c. Loss = $540 –$206 =$334
d Provision
for Income Taxes or Income Tax Expense
($600*.4) $240
Deferred Tax Asset $184
Income
Taxes Payable or Cash) ($1,000 *.3) 56
2.
a. Loss = $540 – Tax benefit ($540 * .4) $216 = $324
b. Provision for Income Taxes or Tax Loss
Benefit $43.2
Allowance
to reduce Deferred Tax Asset (NOL)
to
Net realizable value
$43.2
c.
Provision for Income Taxes or Income Tax Expense ($600*.4) $240
Allowance to reduce Deferred Tax Asset (NOL)
to
net realizable value 43.2
Deferred Tax Asset $216
Income
Taxes Payable or Cash) 67.2