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The Moore Company has sales of $500,000 that are recorded for book purposes in 2014

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The Moore Company has sales of $500,000 that are recorded for book purposes in 2014. For tax purposes, the company uses the installment sales method, resulting in revenue of $150,000 in 2014 and $350,000 in 2015. A temporary difference of $350,000 originates in 2014 and reverses in 2015.  Assume that the enacted tax rate for 2014 is 30 percent and that the enacted tax rate for 2015 is 40 percent and is known at the time the Deferred Tax account is established. The  deferred tax for the year 2014 results in a Deferred Tax

a.      Asset debit entry of $105,000

b.      Liability credit entry of $105,000

c.      Asset debit entry of $140,000

d.      Liability credit entry of $140,000

 

2. Assume the following facts for Moore Company in 2015:

Book income before tax: $800000. The following items were included in income:

Interest income of $80000 was received from an investment in municipal bands. This income is exempt for tax purposes.

Rent income of $20000 was collected in 2014 and included for tax purposes. For book purposes, it was reported as earned in 2015.

The following items were deducted from income:

An asset was purchased during 2015, and depreciation for book purposeswas $40000. There was $100000 deducted for tax purposes.

Warranty expense of $20,000 was recognized for book purposes, while $5,000 was recognized for tax purposes(assume a one-year warranty contract)

The balance of the Deferred Tax Asset account(debit) at January 1,2015, was $8,000 as a result of the rent income temporary difference. The tax rate for all years was 40 percent. What is the amount of taxable income for tax purpose?

a.      655.000

b.      625,000

c.      735,000

d.      755,000

3. Moore Company had book income before tax of $800,000 in 2015. The following items were included in book income before tax

1) tax-exempt municipal bond interest income of $80,000

2) rent income of $20,000 that was collected and included in income for tax purpose in 2014 but reported for book purposes are earned in 2015

3) tax depreciation in excess of book depreciation of $60,000

Warranty expense of $20,000 was recognized for book purposes, while $5,000 was recognized for tax purpose(assume a one-year warranty contract)

The balance of the deferred tax asset account(debit) at January 1,2015 was $8,000 as a result of the rent income temporary difference. The tax rate for all years was 40 percent. What is the balance of the deferred tax liability account at the end of 2015?

A. 24000

B. 18000

C. 8000

D. 6000

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[Solved] The Moore Company has sales of $500,000 that are recorded for book purposes in 2014

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