homework6.docx

# homework6.docx - Chapter 6 2 A \$13,750 34(\$92,000 \$75,000 =...

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Chapter 6 2. A. \$13,750 + 34%*(\$92,000 - \$75,000) = \$19,530 B. Annualized income = \$92,000 * (12/4) = \$276,000 \$22,250 + 39%*(\$276,000 - \$100,000) = \$90,890 5. FruAgro’ s taxable income = \$23.4 + \$15.5 = \$38.9 million 7. A. No effect C. No effect 8. Although Firm Q is a cash basis taxpayer and received only \$10,000 cash , it rec- ognizes the \$23 ,400 total value of the cash and non-cash payment as taxable in- come. 10. A. If Malo Inc. is a cash basis tax payer it should not recognize income for the services rendered nor \$5,000 for prepaid parking. D. If Malo Inc. is an accrual basis tax payer it should recognize \$9,500 income for the services rendered and also \$5,000 for prepaid parking. 19. a. Tax expense = \$700,000 *34% = \$238,000 b. Tax payable = \$810,000 * 34% = \$275,400 c. The excess of tax payable over tax expense is a \$37,400 net increase in de- ferred tax assets 22. Net income before tax \$505,100 Deduction (\$319,000 * 9%) (28,764) Prepaid income 40,000 Accrued expense No difference Net operating loss deduction (21,400) Taxable income \$494,936 25. a. KLP uses the cash method of accounting , it can deduct \$100,000 in the year of payment. d. For financial statement purposes , KLP must accrue a \$100,000 expense in

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