ACC 455 Apply: Week 4 Application Assignment

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ACC 455 Apply: Week 4 Application Assignment
ACC 455 Apply: Week 4 Application Assignment
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ACC 455 Apply: Week 4 Application Assignment

Review the Week 4 Knowledge Check in preparation for this assignment.

Complete the Week 4 Application Assignment in McGraw-Hill Connect.

Packard Corporation reported pretax book income of $501,200. Included in the computation were favorable temporary differences of $11,200, unfavorable temporary differences of $101,200, and unfavorable permanent differences of $80,600. The corporation’s current income tax expense or benefit would be:

Multiple Choice

$141,078 tax expense.

$124,230 tax benefit.

$122,178 tax expense.

$105,252 tax benefit.

 

 

 

Smith Company reported pretax book income of $420,000. Included in the computation were favorable temporary differences of $54,000, unfavorable temporary differences of $22,000, and favorable permanent differences of $42,000. Smith’s deferred income tax expense or benefit would be:

Multiple Choice

Net deferred tax expense of $6,720.

Net deferred tax benefit of $6,720.

Net deferred tax expense of $15,960.

Net deferred tax benefit of $15,960.

 

 

 

Robinson Company had a net deferred tax liability of $34,544 at the beginning of the year, representing a net taxable temporary difference of $101,600 (taxed at 34%). During the year, Robinson reported pretax book income of $401,600. Included in the computation were favorable temporary differences of $51,600 and unfavorable temporary differences of $20,800. During the year, Congress reduced the corporate tax rate  from 34% to 21%. Robinson’s deferred income tax expense or benefit for the current year would be:

Multiple Choice

Net deferred tax benefit of $6,468.

Net deferred tax expense of $6,468.

Net deferred tax benefit of $6,740.

Net deferred tax expense of $6,740.

 

 

 

TarHeel Corporation reported pretax book income of $1,020,000. During the current year, the net reserve for warranties increased by $101,000. In addition, tax depreciation exceeded book depreciation by $205,000. Finally, TarHeel subtracted a dividends received deduction of $54,000 in computing its current year taxable income. TarHeel’s accounting effective tax rate is:

Multiple Choice

21%.

19.89%.

18.78%.

17.66%.

 

 

 

Jones Company reported pretax book income of $410,000. Included in the computation were favorable temporary differences of $51,000, unfavorable temporary differences of $20,500, and favorable permanent differences of $40,500. Book equivalent of taxable income is:

Multiple Choice

$450,500.

$410,000.

$369,500.

$338,500.

 

 

 

Marlin Corporation reported pretax book income of $1,020,000. During the current year, the net reserve for warranties increased by $29,000. In addition, book depreciation exceeded tax depreciation by $102,000. Finally, Marlin subtracted a dividends received deduction of $17,000 in computing its current year taxable income. Marlin’s current income tax expense or benefit would be:

 

Multiple Choice

$241,710 tax expense.

$238,140 tax expense.

$214,200 tax expense.

$209,370 tax expense.

 

 

 

Grand River Corporation reported pretax book income of $550,000. Included in the computation were favorable temporary differences of $125,000, unfavorable temporary differences of $50,000, and favorable permanent differences of $110,000. The corporation’s current income tax expense or benefit would be:

Multiple Choice

$115,500 tax benefit.

$110,250 tax expense.

$99,750 tax benefit.

$76,650 tax expense.

 

 

 

Costello Corporation reported pretax book income of $500,600. During the current year, the reserve for bad debts increased by $6,200. In addition, tax depreciation exceeded book depreciation by $40,600. Finally, Costello received $3,300 of tax-exempt life insurance proceeds from the death of one of its officers. Costello’s deferred income tax expense or benefit would be:

Multiple Choice

$7,224 net deferred tax expense.

$7,224 net deferred tax benefit.

$7,884 net deferred tax benefit.

$7,917 net deferred tax expense.

 

 

 

Green Corporation reported pretax book income of $1,012,000. During the current year, the net reserve for warranties increased by $50,600. In addition, tax depreciation exceeded book depreciation by $103,000. Finally, Green subtracted a dividends received deduction of $25,300 in computing its current year taxable income. Green’s cash tax rate is:

Multiple Choice

21%.

20.48%.

19.95%.

19.39%.

 

 

 

Angel Corporation reported pretax book income of $1,022,000. During the current year, the net reserve for warranties increased by $28,300. In addition, tax depreciation exceeded book depreciation by $105,500. Finally, Angel subtracted a dividends received deduction of $29,400 in computing its current year taxable income. Angel’s hypothetical tax expense in its reconciliation of its income tax expense is:

Multiple Choice

$214,620.

$208,677.

$198,408.

$192,465.

 

 

 

Sam owns 70 percent of the stock of Club Corporation. Unrelated individuals own the remaining 30 percent. For a stock redemption of Sam’s stock to be treated as an exchange under the “substantially disproportionate” test, what percentage of Club stock must Sam own after the redemption?

Multiple Choice

Any percentage less than 70 percent.

Any percentage less than 56 percent.

Any percentage less than 50 percent.

All stock redemptions involving individuals are treated as exchanges.

 

 

 

Grand River Corporation reported taxable income of $550,000 in 20X3 and paid federal income taxes of $187,000. Not included in the computation was a disallowed meals and entertainment expense of $2,100, tax-exempt income of $1,100, and deferred gain on a current year transaction treated as an installment sale of $25,500. The corporation’s current earnings and profits for 20X3 would be:

Multiple Choice

$574,400.

$550,000.

$387,500.

$364,100.

 

 

 

Beltway Company is owned equally by George, his brother Thomas, and a partnership owned 50 percent by George and his father Abe. Each of the three shareholders holds 160 shares in the company. Under the §318 stock attribution rules, how many shares of Beltway stock is George deemed to own?

Multiple Choice

160

240

320

480

 

 

 

Comet Company is owned equally by Pat and his sister Pam, each of whom hold 170 shares in the company. Pam wants to reduce her ownership in the company, and it was decided that the company will redeem 85 of her shares for $1,700 per share on December 31, 20X3. Pam’s income tax basis in each share is $850. Comet has total E&P of $285,000. What are the tax consequences to Pam because of the stock redemption?

Multiple Choice

$72,250 capital gain and a tax basis in each of her remaining shares of $850.

$72,250 capital gain and a tax basis in each of her remaining shares of $170.

$144,500 dividend and a tax basis in each of her remaining shares of $170.

$144,500 dividend and a tax basis in each of her remaining shares of $85.

 

 

 

Viking Corporation is owned equally by Sven and his wife Olga, each of whom hold 100 shares in the company. Viking redeemed 70 shares of Sven’s stock for $1,700 per share on December 31, 20X3. Viking has total E&P of $490,000. What are the tax consequences to Viking because of the stock redemption?

Multiple Choice

No reduction in E&P because of the exchange.

A reduction of $119,000 in E&P because of the exchange.

A reduction of $171,500 in E&P because of the exchange.

A reduction of $343,000 in E&P because of the exchange.

 

 

 

Bruin Company reports current E&P of $320,000 in 20X3 and accumulated E&P at the beginning of the year of $160,000. Bruin distributed $520,000 to its sole shareholder on January 1, 20X3. How much of the distribution is treated as a dividend in 20X3?

rev: 04_23_2019_QC_CS-166838

Multiple Choice

$520,000.

$480,000.

$320,000.

$160,000.

 

 

 

Lansing Company is owned equally by Jennifer, her husband Dan, and DeWitt Corporation, which is owned 50 percent by Jennifer and her sister Jane. Each of the three shareholders holds 260 shares in the company. Under the §318 stock attribution rules, how many shares of Lansing stock is DeWitt Corporation deemed to own?

Multiple Choice

260

520

650

780

 

 

 

El Toro Corporation declared a common stock distribution to all shareholders of record on June 30, 20X3. Shareholders will receive 1 share of El Toro stock for each 2 shares of stock they already own. Raoul owns 340 shares of El Toro stock with a tax basis of $78 per share. The fair market value of the El Toro stock was $118 per share on June 30, 20X3. What are the tax consequences of the stock distribution to Raoul?

Multiple Choice

$0 dividend income and a tax basis in the new stock of $118 per share.

$0 dividend income and a tax basis in the new stock of $78 per share.

$0 dividend income and a tax basis in the new stock of $52 per share.

$20,060 dividend and a tax basis in the new stock of $118 per share.

 

 

 

Longhorn Company reports current E&P of $140,000 in 20X3 and accumulated E&P at the beginning of the year of negative $280,000. Longhorn distributed $420,000 to its sole shareholder on January 1, 20X3. The shareholder’s tax basis in his stock in Longhorn is $140,000. How is the distribution treated by the shareholder in 20X3?

Multiple Choice

$140,000 dividend.

$140,000 dividend, $140,000 tax-free return of basis, and $140,000 capital gain.

$140,000 dividend and $280,000 tax-free return of basis.

$0 dividend, $140,000 tax-free return of basis, and $280,000 capital gain.

 

 

 

Abbot Corporation reported a net operating loss of $560,000 in 20X3, which the corporation elected to carryforward to 20X4. Included in the computation of the taxable loss was regular depreciation of $260,000 (E&P depreciation is $65,000), first year expensing under §179 of $66,000, and a dividends received deduction of $11,600. The corporation’s current earnings and profits for 20X3 would be:

 

Multiple Choice

($300,600).

($353,400).

($560,000).

($691,000).