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Multiple Choice

Matthew Company reported $350,000 in income before income tax for financial reporting (book) purposes in Year 3, its first year of operation. The tax depreciation exceeded its book depreciation by $30,000. The tax rate for Year 3 and all future years is 40%.

1. What amount of deferred income tax should Matthew report in its December 31, Year 3, balance sheet?
a. $8,000 deferred tax asset
b. $9,000 deferred tax liability
c. $10,000 deferred tax asset
d. $12,000 deferred tax liability

2. If Matthew paid no estimated taxes, what amount of income taxes payable should be reported in its December 31, Year 3, balance sheet?
a. $100,000
b. $120,000
c. $128,000
d. $140,000

3. Income tax expense reported on Matthew's income statement for Year 3 would be ___________.
a. $120,000
b. $128,000
c. $140,000
D. $152,000

4. The journal entry to record the taxes for Matthew Company at December 31, Year 3 would be which one of the following?
a. DR Income tax expense 140,000
CR Deferred income tax payable 12,000
CR Income Tax Payable 128,000

b. DR Income tax expense 128,000
CR Cash 128,000

c. DR Income tax expense 140,000
CR Cash 140,000

d. DR Income tax expense 152,000
CR Deferred income tax payable 140,000
CR Income tax payable 12,000

Solution Preview

1. The excess tax depreciation is $30,000. Since the book income is higher than the taxable income, this will give rise to a deferred tax liability
The amount of deferred tax ...

Solution Summary

The solution explains various multiple choice questions relating to income taxes

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