Problem 1. Gold Ltd. reported deferred tax assets and deferred tax liabilities at the end of 2001 and 2002. For the year ended 2002, Gold should report deferred income tax expense or benefit equal to the
a. Sum of the net changes in deferred tax assets and deferred tax liabilities.
b. Decrease in deferred tax assets.
c. Increase in deferred tax liabilities.
d. Amount of current tax liability plus the sum of the net changes in deferred tax assets and deferred tax liabilities.
Problem 2. A deferred tax liability is computed using
a. The current tax laws, unless enacted future laws are different.
b. The current tax laws, regardless of expected or enacted future tax laws.
c. Expected future tax laws, regardless of whether they have been enacted or not.
d. Either current or expected future tax laws, regardless of whether those expected laws have been enacted.
Problem 3. Purple Co.'s PTFI was $200,000 and TI was $150,000 in 2001. The difference is due to the following:
Interest on municipal bonds 70,000
Key man life insurance premium (20,000)
Purple's tax rate was 30%. In 2001, what amount should it report as the current provision for income tax expense?
a. 51,000
b. 45,000
c. 66,000
d. 60,000
Questions 4 and 5 are based on the following information
Orange Corp. has one temporary difference at the end of 1999 that will reverse out and cause taxable amounts as follows:
2000 2001 2002
55,000 60,000 65,000
Pretax financial income is $300,000 and the tax rate is 30% for all years.
Problem 4. For 1999, the income tax expense is:
a. 54,000
b. 36,000
c. 90,000
d. 180,000
Problem 5. For 1999, the deferred liability is:
a. 54,000
b. 90,000
c. 180,000
d. 36,000