CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS

1572. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question MC #1
Purple, Inc., a domestic corporation, owns 100% of Blue, Ltd., a foreign corporation and Yellow, Inc., a domestic corporation. Purple also owns 40% of Green, Inc., a domestic corporation. Purple receives no distributions from any of these corporations. Which of these entities’ net income are included in Purple’s GAAP income statement for current year financial reporting purposes?

a. Purple, Blue, Yellow, and Green.
b. Purple, Blue, and Yellow.
c. Purple, Blue, and Green.
d. Purple, Yellow, and Green.

1573. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question MC #2
Create, Inc., a domestic corporation, owns 100% of Vinyl, Ltd., a foreign corporation and Digital, Inc., a domestic corporation. Create also owns 12% of Record, Inc., a domestic corporation. Create receives no distributions from any of these corporations. Which of these entities’ net income are included in Create’s income statement for current year financial reporting purposes?

a. Create, Vinyl, Digital, and Record.
b. Create, Vinyl, and Record.
c. Create, Vinyl, and Digital.
d. Create, Digital, and Record.
e. None of the above.

1574. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question MC #3
Purple, Inc., a domestic corporation, owns 80% of Blue, Ltd., a foreign corporation and Yellow, Inc., a domestic corporation. Purple also owns 50% of Green, Inc., a domestic corporation. Purple receives no distributions from any of these corporations. Which of these entities’ net income are included in Purple’s Federal tax return for the current year assuming Purple elects to include all eligible entities in its consolidated Federal income tax return?

a. Purple, Blue, Yellow, and Green.
b. Purple, Blue, and Yellow.
c. Purple, Blue, and Green.
d. Purple and Yellow.

1575. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question MC #4
Create, Inc., a domestic corporation, owns 90% of Vinyl, Ltd., a foreign corporation and Digital, Inc., a domestic corporation. Create also owns 60% of Record, Inc., a domestic corporation. Create receives no distributions from any of these corporations. Which of these entities’ net income are included in Create’s Federal tax return for the current year assuming Create elects to include all eligible entities in its consolidated Federal income tax return?

a. Create and Digital.
b. Create, Vinyl, and Digital.
c. Create, Vinyl, and Record.
d. Create, Vinyl, Digital, and Record.

1576. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question MC #5
Which of the following taxes are included in the total income tax expense of a corporation as reported on its financial statements?

a. State income taxes.
b. Local income taxes.
c. Foreign income taxes.
d. Federal income taxes.
e. All the above taxes are included.

1577. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question MC #6
Which of the following taxes are included in the total income tax expense of a corporation reported on its Federal tax return?

a. State income taxes.
b. Local income taxes.
c. Foreign income taxes.
d. Federal income taxes.
e. All the above taxes are included

1578. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question MC #7
Which of the following items represents a temporary book-tax difference?

a. Municipal bond interest.
b. Compensation-related expenses.
c. Meals and entertainment expense deduction.
d. Nondeductible penalties.

1579. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question MC #8
Phyllis, Inc., earns book net income before tax of $600,000. Phyllis puts into service a depreciable asset this year, and first year tax depreciation exceeds book depreciation by $120,000. Phyllis has recorded no other temporary or permanent book-tax differences. Assuming that the U.S. tax rate is 35%, what is Phyllis’s total income tax expense reported on its GAAP financial statements?

a. $252,000.
b. $210,000.
c. $168,000.
d. $42,000.

1580. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question MC #9
Gravel, Inc., earns book net income before tax of $600,000. Gravel puts into service a depreciable asset this year, and first year tax depreciation exceeds book depreciation by $120,000. Gravel has recorded no other temporary or permanent book-tax differences. Assuming that the U.S. tax rate is 35%, what is Gravel’s current income tax expense reported on its GAAP financial statements?

a. $252,000.
b. $210,000.
c. $168,000.
d. $42,000.

1581. CHAPTER 14—TAXES ON THE FINANCIAL STATEMENTS Question MC #10
Clipp, Inc., earns book net income before tax of $600,000. Clipp puts into service a depreciable asset this year, and first year tax depreciation exceeds book depreciation by $120,000. Clipp has recorded no other temporary or permanent book-tax differences. Assuming that the U.S. tax rate is 35%, what is Clipp’s deferred income tax liability reported on its GAAP financial statements?

a. $252,000.
b. $210,000.
c. $168,000.
d. $42,000.