Questions from Financial Reporting

Q: Moss Inc. follows GAAP for financial reporting purposes and appropriately uses

Moss Inc. follows GAAP for financial reporting purposes and appropriately uses the installment method of accounting for income tax purposes. It reported $250,000 of pre-tax incomeunder GAAP, but it wi...

Q: In 20X1, MB Inc. is subject to a 21%

In 20X1, MB Inc. is subject to a 21% tax rate. For book purposes, it expenses $1,500,000 ofexpenditures. MB intends to deduct these expenditures on its 20X1 tax return despite tax lawprecedent that ma...

Q: Flower Company started doing business on January 1, 20X0. For

Flower Company started doing business on January 1, 20X0. For the year ended December 31, 20X1, it reported $450,000 pre-tax book income on its income statement. Flower is subject toa 21% corporate ta...

Q: Boers Corporation and Bernstein, Inc. both project pre-tax

Boers Corporation and Bernstein, Inc. both project pre-tax income of $100 million in 20X1. Both also expect there to be no change in their cumulative temporary differences during the year. However, th...

Q: Goff Corporation has only one temporary difference, which is related to

Goff Corporation has only one temporary difference, which is related to the use of accelerateddepreciation for income tax purposes and straight-line depreciation for financial reporting. Goff had the...

Q: Cishek Corporation sold $100 million of gift cards in 20X1.

Cishek Corporation sold $100 million of gift cards in 20X1. The gift cards may be used to purchase goods from Cishek in the future. The gift cards never expire, and Cishek expects that none of the gif...

Q: Devers Corporation began operations in 20X1 and had the following partial income

Devers Corporation began operations in 20X1 and had the following partial income statements, which are complete only down to pre-tax income. Devers had no book-tax differences except for the effects o...

Q: The disclosure rules for business combinations complicate financial analysis. Trend analysis

The disclosure rules for business combinations complicate financial analysis. Trend analysis becomes difficult because comparative financial statements are not retroactively adjusted to include data f...

Q: Trevathan Corporation has only one source of temporary differences—warranties.

Trevathan Corporation has only one source of temporary differences—warranties. At December 31,2016, 2017, and 2018, the amounts of cumulative temporary differences were as follows: T...

Q: Bortles Corporation’s U.S. operations have been in “steady

Bortles Corporation’s U.S. operations have been in “steady state” for several years, whereby itspre-tax income has been constant (at $400 million each year) and its originating temporarydifferences an...