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i2pt31w - INTERMEDIATE ACCOUNTING II(3112 Prep Test 3 Part...

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INTERMEDIATE ACCOUNTING II (3112) Prep Test 3, Part I Select the ONE best answer to the following multiple choice questions. 1. Which one of the following basic principles or assumptions of accounting best supports the argument for interperiod tax allocation? a. A going concern assumption. b. The full disclosure principle. c. A periodicity assumption. d. The matching principle. e. The revenue recognition principle. 2. On January 2, 2006, Gow Corporation bought a press for $36,000, with an estimated useful life of five years and a salvage value of $6,000. Straight-line depreciation over 5 full years is used for financial statement purposes. Straight-line depreciation over 3 years with no salvage is used for tax purposes (1/2-year depreciation for 2006). Assuming an income tax of 40%, no other timing differences, and an operating cycle of one-year, what amount should be reported on the balance sheet as deferred income taxes at December 31, 2008? a. liability of $6,400. b. liability of $7,000. c. liability of $2,400. d. liability of $4,800. e. liability of $2,800. 3. A company has four categories of A deferred income tax @ arising from timing differences: (1) current assets, (2) noncurrent assets, (3) current liabilities, and (4) noncurrent liabilities. The A deferred income tax @ should be presented on this company = s balance sheet as: a. A single net amount. b. A net current and a net noncurrent amount. c. Four amounts with no netting permitted. d. Valuation adjustments of the related assets and liabilities that gave rise to the deferred tax.
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4. In 2007, Waldo company paid the annual premiums of $80,000 on officers = life insurance (on which the company is the beneficiary) and received $120,000 of interest income on municipal obligations. Also in 2007, Waldo collected $200,000 in royalties. For income tax reporting, the royalties are taxed when collected. For financial statement reporting, the royalties are recognized as income in the period earned. The unearned portion of the royalties collected in 2007 amounted to $150,000 at December 31, 2007. Assuming an income tax rate of 40%, what amount of deferred taxes would be recorded as a result of these transactions?
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