081m2a - EXAM BOOK MIDTER M2 BUAD 250a Spring 2008 Page(s)...

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EXAM BOOK MIDTE RM 2 BUAD 250a Spring 2008 Page(s) Topic(s) Points 1 The Cover Sheet 3 2 Deferred Taxes 30 3 Current Tax Expense 11 4 Accounting for Uncollectib les #1 20 4 Accounting for Uncollectib les #2 48 5 Accounting for Inventory Errors 30 6 Inventory Methods and Systems 45 7 Inventory 'Cutoffs' 36 Accounting for Property, Plant & Equipment and Depreciatio n 50 Accounting for Constructio n Projects 30 Totals 300
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I pledge, on my honor, that I have not received help from any unauthorized sources prior to or during the exam. Nor have I provided any unauthorized assistance to any fellow student during the exam. signed ____ ____ ____ ____ ____ ____ ___ Answers must be written in the Answer Book to be graded. All answers not in the Answer Book will not be reviewed or counted. The Answer Book must be turned in along with this Exam Book. If there is ambiguity in a question, answer to the best of your ability and note your assumptions in the Answer Book next to your answer. Watch your time carefully. Correctly showing your 4-digit number in the space provided in the Answer Book will result in a 3- point bonus added to your score.
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Deferred Taxes: [081M2a] Michael Company was formed in Year 1. Cumulatively through the end of Year 4, when considering only temporary differences, the firm’s financial income had exceeded its taxable income by $2,800. In Year 4, the firm’s tax rate was 30% and this rate was expected in the future. The firm’s Deferred Tax Liability at the end of Year 4 had been $840. The firm’s Deferred Tax Expense for Year 4 had been a $480 credit. For Year 5 alone, when considering only temporary differences, Michael Company’s taxable income was $600 larger than the firm’s financial income. The firm’s tax rate in Year 5 dropped to 25% and this rate was expected to apply in years after Year 5. ■How large was the firm’s Deferred Tax Expense in Year 5? If a credit, please indicate by placing your answer in parentheses. Show your final answer in the answer book. [15 points] For Year 6 alone, when considering only temporary differences, Michael Company’s financial income was $200 larger than the firm’s taxable income. The firm’s tax rate in Year 6 rose to 35% and this rate was expected to apply in years after Year 6. ■How large was the Michael Company’s Deferred Tax Expense in Year 6? If a credit, please indicate by placing your answer in parentheses. Show your final answer in the answer book. [15 points] Exam continued on next page Current Tax Expense: [081M2a] The Brooke Company was formed in Year 1. During the firm’s first year, the firm had financial accounting [FA] income of $2,600. During Year 1, the firm had two permanent differences between FA and tax accounting [TA]: life insurance premiums of $220 on policies for which the firm was the beneficiary and municipal bond interest revenue, $600. The firm had two temporary differences: its FA depreciation expense had been smaller than its TA depreciation
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081m2a - EXAM BOOK MIDTER M2 BUAD 250a Spring 2008 Page(s)...

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