Accounting 4356 Exam 3 Test Questions and Correct Answers

The creation of a deferred tax liability of £257 = £857 x 0.30 each year for the next 7 years. A company owns equipment purchased at the beginning of the 2014 fiscal year for £20,000. For simplicity, assume a salvage value of £0 at the end of the equipment's useful life. Assume a tax rate of 30%. Accounting standards permit equipment to be depreciated on a straight-line basis over a 10-year period so annual depreciation will be £2,000 (£20,000 ÷ 10). Tax standards in the jurisdiction specify that equipment should be depreciated on a straight-line basis over a 7-year period; annual depreciation will be £2,857 (£20,000 ÷ 7). If the company uses straight line depreciation for reporting and accelerated depreciation for computing taxes, this situation will most likely result in A deferred tax liability of $4,200 A firm buys a $25,000 car and will depreciate it for reporting purposes to $5,000 over 5 years using the Straight Line method. The tax law allows the firm to expense this asset. The tax rate is 20%. As a result at the end of the first year they will have €2,500,000 Company ABC capitalized development costs of €3 million and amortized €500,000 of this amount during the year. For tax purposes, amortization of 25% per year is allowed. The ABC Company will most likely carry this on their books at permanent difference When accounting standards require recognition of an expense that is not permitted under tax laws, the result is a: $9,672,678 On January 1 of 2014 the ABC firm issues $10,000,000 par value of ten-year 3 percent coupon bonds with semi-annual payments. Payments are due December 31 and June 30 of each year. the first payment was made June 30 2014. On the date of issuance interest rates were 3.50%. The carrying value of these bonds on July 1 2016 was closest to $440,000 premium On January 1 of 2014 the ABC firm issues $10,000,000 par value of ten-year 3 percent coupon bonds with semi-annual payments. Payments are due December 31 and June 30 of each year. the first payment was made June 30 2014. On the date of issuance interest rates were 2.50%. The amount of the discount or premium at issuance was closest to: $44,000 The Lessee Company signs a 5-year non-cancellable lease with the Lessor Company on January 1, 2016 when the lease begins. The lease calls for 5 payments of $25,000 (paid start of each year). The leased asset has a fair market value at the start of the lease of $100,000. The lease calls for an end-of-lease payment of $4,000. Using the effective interest rate method of amortization, the lease obligation balance on January 1, 2018 will be closest to: