Chapter 19quiz question

Chapter 19quiz question - QUIZ#3 CHAPTER 19 Name Date Use...

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Name: __________________________ Date: _____________ Use the following to answer question 1: O'Malley Corporation prepared the following reconciliation for its first year of operations: Pretax financial income for 2008 $ 900,000 Tax exempt interest (75,000) Originating temporary difference (225,000 ) Taxable income $600,000 The temporary difference will reverse evenly over the next two years at an enacted tax rate of 40%. The enacted tax rate for 2008 is 35%. 1. In O'Malley's 2008 income statement, what amount should be reported for total income tax expense? A) $330,000 B) $315,000 C) $300,000 D) $210,000 2. Smiley Corporation purchased a machine on January 2, 2006, for $2,000,000. The machine has an estimated 5-year life with no salvage value. The straight-line method of depreciation is being used for financial statement purposes and the following MACRS amounts will be deducted for tax purposes: Assuming an income tax rate of 30% for all years, the net deferred tax liability that should be reflected on Smiley's balance sheet at December 31, 2007, should be Page 1 $400,000 2009 $230,000 2007 640,000 2010 230,000 2008 384,000 2011 116,000 2006
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