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    Accounting Various - Deferred Liability,Depreciation

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    1. Markes Corporation's partial income statement after its first year of operations is as follows:

    Income before Income Taxes $3,750,000
    Income tax expense
    Current $1,035,000
    Deferred 90,000
    __________ 1,125,000
    Net Income $2,625,000

    Markes uses the straight-line method of depreciation for financial reporting purposes and accelerated depreciation for tax purposes. The amount charged to depreciation expense on its books this year was $1,500,000. No other differences existed between book income and taxable income except for the amount of depreciation.

    Assuming a 30% tax rate, what amount was deducted for depreciation on the corporation's tax return for the current year?

    A. $1,200,000
    B. $1,425,000
    C. $1,500,000
    D. $1,800,000

    2. Machinery was acquired at the beginning of the year. Depreciation recorded during the life of the machinery could result in

    Future Future
    Taxable Amounts Deductible Amounts

    a. Yes Yes
    b. Yes No
    c. No Yes
    d. No No

    A. A
    B. B
    C. C
    D. D

    3. A deferred tax liability is classified on the balance sheet as either a current or a noncurrent liability. The current amount of a deferred tax liability should generally be
    A. The net deferred tax consequences of temporary differences that will result in net taxable amounts during the next year
    B. Totally eliminated from the financial statements if the amount is related to a noncurrent asset.
    C. Based on the classification of the related asset or liability for financial reporting purposes.
    D. The total of all deferred tax consequences that are not expected to reverse in the operating period or one year, whichever is greater

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    Solution Summary

    The solution computes deferred liability,depreciation in different scenarios.