Intermediate Accounting III WGU D105 PA 1 CH 2-4

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24 terms ericblake1999 Preview WGU D 250 term mal Which situation will result in a temporary difference between financial accounting and tax accounting?A company received life insurance proceeds reported as financial income but not as taxable income.A company used straight-line depreciation for financial accounting and an accelerated method for tax.A company listed municipal bond income as net income in financial accounting but not in tax accounting.A company received dividends from another company in which it has ownership.A company used straight-line depreciation for financial accounting and an accelerated method for tax.A company had classified a bond as available for sale in the past and recorded changes in the market value each year properly in other comprehensive income. The company sold these bonds and realized a loss in the current year, which reduced comprehensive income and net income.To avoid double-counting this loss, what should the company do?Record the realized loss by making an adjustment to beginning retained earnings in the current year.Eliminate the realized loss from the computation of comprehensive income in the current year.Record the realized loss by recording a contra account to the bond investment account.Eliminate the realized loss from the computation of net income in the current year.Eliminate the realized loss from the computation of comprehensive income in the current year.

Which debt security is purchased with the intent to sell within three months to generate income on short-term price differences?Available-for-sale Held-to-maturity Trading Warrant Trading A company has securities which they intend to hold until their maturity dates.Which valuation should be used to record these securities?Cost Amortized cost Fair value Net realizable value Amortized cost A company reported its investments in trading securities on its December 31, Year 1 balance sheet. The original cost of the trading securities was $500,000, with a fair value of $475,000. On December 31, Year 2, the fair value of the securities was $467,500.Which amount should the company report on its Year 2 income statement as a result of the decrease in fair value of the investments at the end of Year 2?Realized loss of $7,500 Unrealized loss of $7,500 Unrealized loss of $32,500 Realized loss of $32,500 Unrealized loss of $7,500 The following investment in equity securities is reported

on the December 31, Year 1, balance sheet for a company:

Cost: $370,000

Fair Value: $380,000

At December 31, Year 2, the fair value of the securities was $400,000.Which amount should the company report on its Year 2 income statement as a result of the increase in fair value of the investments in Year 2?Realized gain of $30,000 Unrealized gain of $30,000 Unrealized gain of $20,000 Realized gain of $20,000 Unrealized gain of $20,000 Which value is reported in the financial statements for held-to-maturity securities?Amortized value Fair value Maturity value Original value Amortized value

Which statement describes the accounting treatment for the transfer of debt securities from available-for-sale to held-to-maturity?Unrealized gains or losses at the date of transfer are amortized over the remaining life of the securities.Unrealized gains or losses at the date of transfer are recognized in income.Realized gains or losses at the date of transfer are amortized over the remaining life of the securities.Realized gains or losses at the date of transfer are recognized in income.Unrealized gains or losses at the date of transfer are amortized over the remaining life of the securities.Debt securities are transferred from trading to available for sale, and from available for sale to trading.What is the accounting treatment for this transaction?Realized gains or losses at the date of the transfer are recognized in the income statement.Realized gain or losses at the date of the transfer are recognized in other comprehensive income.Unrealized gains or losses at the date of the transfer are recognized in other comprehensive income.Unrealized gains or losses at the date of the transfer are recognized in the income statement.Unrealized gains or losses at the date of the transfer are recognized in the income statement.Which partial journal entry should be recorded to amortize a bond premium for an available-for-sale security using the effective-interest method?Debit to Debt Investments Debit to Interest Expense Credit to Debt Investments Credit to Interest Expense Credit to Debt Investments Which description illustrates the nature of a deferred tax asset?Decrease in refundable taxes in future years as a result of deductible temporary differences.Increase in refundable taxes in future years as a result of deductible temporary differences.Decrease in refundable taxes in future years as a result of taxable temporary differences.Increase in refundable taxes in future years as a result of taxable temporary differences Increase in refundable taxes in future years as a result of deductible temporary differences

During Year 1, Company A purchased 15,000 shares of Company B common stock for $82,500. The fair value of these shares was $120,000 at December 31, Year 1.Company A sold all of the Company B stock for $7.50 per share on July 3, Year 2, incurring $5,000 in brokerage commissions.Which amount should Company A report as a realized gain on the sale of stock in Year 2?

$2,500$7,500$25,000$30,000

25000 A company had pretax accounting income of $1,500,000.

The company had the following data:

Income from exempt municipal bonds: $70,000

Depreciation for tax purposes in excess of depreciation

for financial statement purposes: $110,000

Estimated federal income tax payments: $200,000

Enacted corporate income tax rate: 20%

What is the credit to federal income tax liability as the result of these transactions?

$64,000$78,000$86,000$100,000

$64,000

Which difference will cause a deferred tax liability?A difference between domestic and international financial reporting standards A difference between financial income and taxable income on the balance sheet A difference between when the tax is accrued and when it is paid A difference between financial income and taxable income on the income statement A difference between when the tax is accrued and when it is paid Which characteristic is associated with an uncertain tax position?When a company's tax position has not been changed by a taxing authority's auditor in the past When the tax law requires substantial interpretation by the taxpayer When the tax law clearly indicates which tax position will be honored by a taxing authority When a company's tax position follows specific guidance that has been issued by a taxing authority When the tax law requires substantial interpretation by the taxpayer Which balance sheet classification is appropriate for deferred taxes when using generally accepted accounting principles (GAAP)?Noncurrent income tax expense Noncurrent liability Current income tax expense Contra liability Noncurrent liability