Accounting Skills (Securities, Derivatives and Investments), Finance And Accounting

Question: XYZ Company reports income tax expense of $224,000 on its Income Statement for the year ending December 31 Year 4. Included in Year 4's income is interest revenue of $40,000 from some tax-exempt municipal bonds that the company owns. In computing its income tax expense of $224,000, the company also had a temporary difference of $80,000, which will result in a future tax deduction. It is assumed that a tax rate of 30 percent will apply to the future tax deduction. The tax rate for Year 4 (the company's first year of operations) is 40 percent. Given the above information, how would XYZ Company report the tax effect of the permanent difference on its Balance Sheet for the current year?
A
As a deferred tax asset of $16,000

B
As a deferred tax liability of $16,000

C
Nothing would be reported on the Balance Sheet because a permanent difference has no effect on deferred taxes.

D
None of these

Note: Answer not sure
1. Report
Question: XYZ Company has three securities in its portfolio available for sale, as follows: Security 1: Beatty, Cost: $78,000, 12/31/06 Market Value: $93,600, 12/31/07 Market Value:$100,100 Security 2: Cole, CoSt: $117,000, 12/31/06 Market Value: $120,900, 12/31/07 Market Value:$0 Security 3: Sells, Cost: $58,500, 12/31/06 Market Value: $53,500, 12/31/07 Market Value:$50,700 The Cole stock was sold in Year 2 for $127,400. Given the above information, what would XYZ Company report on its income Statement for the year ending 12/31 Year 2 relative to the sale of the Cole stock in Year 2?
A
A realized gain of $6,500

B
A realized gain of $6,500 and an unrealized gain of $3,900

C
A realized gain of $10,400

D
An unrealized gain of $10,400

Note: Answer not sure
1. Report
Question: XYZ Company acquires marketable securities in Year 1 at a cost of $90,000. The securities can be readily converted into cash and XYZ Company intends to do so when it needs cash. How would XYZ Company report this investment on its Year 1 Balance Sheet?
A
As a current asset in the Marketable Securities account

B
As a current asset in the Investment in Securities account

C
As a noncurrent asset in the Marketable Securities account

D
As a noncurrent asset in the Investment in Securities account

Note: Answer not sure
1. Report
Question: If an acquisition qualifies as a pooling of interest, the reported income for the consolidated enterprise will ordinarily be ___________________.
A
larger than for the same consolidated enterprise accounted for as a purchase

B
smaller than for the same consolidated enterprise accounted for as a purchase

C
equal to the same consolidated enterprise accounted for as a purchase

D
adjusted for goodwill amortization

Note: Answer not sure
1. Report
Question: XYZ Company purchases a machine early in Year 1. For book purposes, XYZ Company uses straight-line depreciation. For tax purposes, the company follows ACRS. Excess depreciation for tax purposes in Year 1 is $36,000. Assume that a tax rate of 30 percent will apply in the future period of taxable income. For Year 2, excess depreciation for tax purposes is $18,000. Given the above information, what would be the balance in the deferred tax liability account at the end of Year 2?
A
$16,200

B
$30,600

C
$23,400

D
$5,400

Note: Answer not sure
1. Report
Question: What type of pension plan is an employee likely to prefer because it reduces the employee's risk in planning for retirement?
A
Non-vesting plan

B
Defined contribution plan

C
Non-funded plan

D
Defined benefit plan

Note: Answer not sure
1. Report
Question: Which of the following scenarios is NOT an example of a situation resulting in a temporary difference and which, therefore, would NOT result in the debiting or crediting of a deferred income tax account?
A
A company uses straight-line depreciation for book purchases and ACRS for tax purposes.

B
Estimated warranty costs are expensed in the year of sale but warranty costs are deducted for tax purposes in the year when repairs are made.

C
In its financial reports, a company reports interest revenue earned on tax-exempt municipal bonds held as assets.

D
A company uses the percentage of completion basis for book purposes, but uses the completed contract basis for tax purposes.

Note: Answer not sure
1. Report
Question: Which of the following statements is NOT true?
A
Consolidated net income is the same amount as that which results when the parent uses the equity method for an unconsolidated subsidiary.

B
Consolidated retained earnings is the same amount as that which results when the parent uses the equity method for an unconsolidated subsidiary.

C
The consolidation process eliminates the Equity in Earnings of Subsidiary account.

D
All of these statements are true.

Note: Answer not sure
1. Report
Question: Which of the following statements is NOT a criticism of the accounting for deferred income taxes?
A
Payment of deferred taxes may be deferred indefinitely.

B
The amount on the Balance Sheet for deferred income taxes is not an obligation.

C
Deferred taxes result in the effective tax rate being different from the statutory tax rate.

D
The amount on the Balance Sheet for deferred income taxes is an undiscounted amount.

Note: Answer not sure
1. Report
Question: XYZ Company acquires common stock of the ABC Company for the purpose of developing a long-term relationship with ABC, which is a major supplier of the raw material used to manufacture XYZ's product. How would XYZ Company report these securities on its Balance Sheet?
A
At acquisition cost and classified as a current asset in the Marketable Securities account

B
At acquisition cost and classified as a noncurrent asset in the Investment in Securities account

C
At market value and classified as a current asset in the Marketable Securities account

D
At market value and classified as a noncurrent asset in the Investment in Securities account

Note: Answer not sure
1. Report

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Question: XYZ Company acquires marketable securities in Year 1 at a cost of $90,000. The securities can be readily converted into cash and XYZ Company intends to do so when it needs cash. How would XYZ Company report this investment on its Year 1 Balance Sheet?

Question: If an acquisition qualifies as a pooling of interest, the reported income for the consolidated enterprise will ordinarily be ___________________.

Question: What type of pension plan is an employee likely to prefer because it reduces the employee's risk in planning for retirement?

Question: Which of the following scenarios is NOT an example of a situation resulting in a temporary difference and which, therefore, would NOT result in the debiting or crediting of a deferred income tax account?

Question: Which of the following statements is NOT true?

Question: Which of the following statements is NOT a criticism of the accounting for deferred income taxes?

Question: XYZ Company acquires common stock of the ABC Company for the purpose of developing a long-term relationship with ABC, which is a major supplier of the raw material used to manufacture XYZ's product. How would XYZ Company report these securities on its Balance Sheet?