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Multiple Choice Questions Regarding Taxes

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1. Gold Ltd. reported deferred tax assets and deferred tax liabilities at the end of 2001 and 2002. For the year ended 2002, Gold should report deferred income tax expense or benefit equal to the
a. Sum of the net changes in deferred tax assets and deferred tax liabilities.
b. Decrease in deferred tax assets.
c. Increase in deferred tax liabilities.
d. Amount of current tax liability plus the sum of the net changes in deferred tax assets and deferred tax liabilities.

2. A deferred tax liability is computed using
a. The current tax laws, unless enacted future laws are different.
b. The current tax laws, regardless of expected or enacted future tax laws.
c. Expected future tax laws, regardless of whether they have been enacted or not.
d. Either current or expected future tax laws, regardless of whether those expected laws have been enacted.

3. Purple Co.'s PTFI was $200,000 and TI was $150,000 in 2001. The difference is due to the following:
Interest on municipal bonds 70,000
Key man life insurance premium (20,000)
Purple's tax rate was 30%. In 2001, what amount should it report as the current provision for income tax expense?

a. 51,000
b. 45,000
c. 66,000
d. 60,000

Questions 4 and 5 are based on the following information
Orange Corp. has one temporary difference at the end of 1999 that will reverse out and cause taxable amounts as follows:
2000 2001 2002

55,000 60,000 65,000

Pretax financial income is $300,000 and the tax rate is 30% for all years.

4. For 1999, the income tax expense is:
a. 54,000
b. 36,000
c. 90,000
d. 180,000

5. For 1999, the deferred liability is:
a. 54,000
b. 90,000
c. 180,000
d. 36,000

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Solution Preview

1. Gold Ltd. reported deferred tax assets and deferred tax liabilities at the end of 2001 and 2002. For the year ended 2002, Gold should report deferred income tax expense or benefit equal to the
a. Sum of the net changes in deferred tax assets and deferred tax liabilities.
b. Decrease in deferred tax assets.
c. Increase in deferred tax liabilities.
d. Amount of current tax liability plus the sum of the net changes in deferred tax assets and deferred tax liabilities.

deferred income tax expense or benefit = current tax liability + the sum of the net changes in deferred tax ...

Solution Summary

This solution provides various multiple choice questions regarding taxes.

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Multiple choice questions in taxation

1) The payment items that should be budgeted first are

A. variable expenses
B. unplanned living expenses
C. fixed expenses
D. investment funds

2) The current financial position (including net worth) of an individual or family is best presented with the use of a

A. cash flow statement
B. time value of money report
C. budget
D. balance sheet

3) A family with $45,000 in assets and $22,000 of liabilities would have a net worth of

A. $23,000
B. $67,000
C. $45,000
D. $22,000

4) Which of the following statements regarding tax credits is true?

A. Tax credits provide a greater tax benefit the greater the taxpayer's marginal tax rate.
B. None of the answer choices are correct.
C. Tax credits reduce taxable income dollar for dollar.
D. Tax credits reduce taxes payable dollar for dollar.

5) Which of the following statements is true?

A. Individuals generally report all excluded income on statements supporting their tax returns.
B. Always report annual licensing fees.
C. All income, whether realized or unrealized, is reported on the individual tax return.
D. Individuals generally report deferred income on their tax returns.

6) All of the following are for AGI deductions EXCEPT

A. rental and royalty expenses
B. charitable contributions
C. moving expenses
D. business expenses

7) Which judicial doctrine means that a court will rule consistently with its previous rulings and the rulings of higher courts with appellate jurisdiction?

A. The Goldman rule
B. Stare decisis
C. Judicial hierarchy
D. Judicial consistency

8) The regulation with the highest authoritative weight is the
A. interpretative regulation
B. legislative regulation
C. procedural regulation
D. proposed regulation

9) Jaime recently found a "favorable" trial level court opinion directly on point for her tax question. Which trial level court would he prefer to have issued the opinion?
A. District Court
B. Divorce Court
C. Tax Court
D. Circuit Court

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