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

Question: In computing its income tax expense for the current year (its first year of operations), XYZ Company has an $18,000 temporary difference (accelerated depreciation for tax purposes). It is assumed that a tax rate of 35 percent will apply to the future period of taxable income. The company's income for tax purposes is $282,000 and the current tax rate is 40 percent. How would XYZ Company report the tax effect of the temporary difference on its Balance Sheet for the current year?
A
As a deferred tax asset of $7,200

B
As a deferred tax liability of $7,200

C
As a deferred tax asset of $6,300

D
As a deferred tax liability of $6,300

Note: Answer not sure
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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, what is XYZ Company's taxable income for Year 4?
A
$560,000

B
$620,000

C
$520,000

D
None of these

Note: Answer not sure
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Question: On its December 31 Year 2 Balance Sheet, XYZ Company reports a current liability for income tax payable of $180,000. During the year, the company's Deferred Tax Liability account increased by $54,000 based on a tax rate of 40 percent applying to the future period of taxable income. The tax rate for Year 2 was 30 percent. What is XYZ's book income for Year 2?
A
$600,000

B
$735,000

C
$780,000

D
$585,000

Note: Answer not sure
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Question: When a company acquires a derivative and attempts to reduce risks involving fluctuations in a market value, the FASB ________________.
A
classifies the transaction as a fair value hedge

B
classifies the transaction as a cash flow hedge

C
requires the derivative to be recorded and continue to be reported at the acquiring cost

D
All of these

Note: Answer not sure
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Question: On January 1 of Year 1, the XYZ Company Clinic leases some diagnostic equipment under a capital lease for six years. Using 10 percent interest, the present value of the lease liability is $244,000 on January 1 of Year 1. After the first lease payment is made on December 31 of Year 1, the clinic reports a lease liability of $212,400. Given the above information, what is the amount of each lease payment?
A
$46,936

B
$31,600

C
$56,000

D
$40,664

Note: Answer not sure
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Question: Which of the following methods is used to recognize goodwill after a business acquisition is accounted for?
A
Pooling of interests method

B
Purchase method

C
Either pooling of interests or purchase method

D
Neither pooling of interest or purchase method

Note: Answer not sure
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Question: XYZ Company purchases securities at a cost of $220,000 on April 16. At the time of purchase, XYZ pays a 5 percent commission ($11,000), a 6 percent tax ($13,200), and a transfer fee ($3,000). What amount should the company record as the acquisition cost of the securities?
A
$220,000

B
$247,200

C
$244,200

D
$234,000

Note: Answer not sure
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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, which of the following statements is true?
A
On its 12/31 Year 1 Balance Sheet, XYZ Company would report the Sells stock at its cost of $58,500.

B
On its Income Statement for the year ending 12/31 Year 1, XYZ Company would report an unrealized holding loss of $5,200.

C
On its Income Statement for the year ending 12/31 Year 2, XYZ Company would report an unrealized holding loss of $2,600.

D
None of these statements is true.

Note: Answer not sure
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Question: XYZ Company reports book income of $96,000 and taxable income of $120,000 (the $24,000 difference is attributed to warranty expenses). The statutory tax rate is 30 percent and the company reports a current liability for income taxes payable of $36,000 on its Year 1 Balance Sheet. In its Income Statement, the company reports income tax expense at an effective rate of 37.5 percent. Given the above information, what amount of income tax expense did XYZ Company report in Year 1?
A
$36,000

B
$21,600

C
$17,280

D
$33,750

Note: Answer not sure
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Question: The equity method is used to account for _________________.
A
minority, passive investments

B
minority, active investments

C
majority, active investments

D
All of these

Note: Answer not sure
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Question: When a company acquires a derivative and attempts to reduce risks involving fluctuations in a market value, the FASB ________________.

Question: Which of the following methods is used to recognize goodwill after a business acquisition is accounted for?

Question: XYZ Company purchases securities at a cost of $220,000 on April 16. At the time of purchase, XYZ pays a 5 percent commission ($11,000), a 6 percent tax ($13,200), and a transfer fee ($3,000). What amount should the company record as the acquisition cost of the securities?

Question: The equity method is used to account for _________________.