Questions from Intermediate Accounting

Q: When a company records a deferred tax asset, it may need

When a company records a deferred tax asset, it may need to also report a valuation allowance if it is “more likely than not” that some portion or all of the deferred tax asset will not be realized. R...

Q: Southern Atlantic Distributors began operations in January 2021 and purchased a delivery

Southern Atlantic Distributors began operations in January 2021 and purchased a delivery truck for $40,000. Southern Atlantic plans to use straight-line depreciation over a four-year expected useful l...

Q: For the year ended December 31, 2021, Fidelity Engineering reported

For the year ended December 31, 2021, Fidelity Engineering reported pretax accounting income of $978,000. Selected information for 2021 from Fidelity’s records follows: Interest income on municipal go...

Q: Allmond Corporation, organized on January 3, 2021, had pretax

Allmond Corporation, organized on January 3, 2021, had pretax accounting income of $14 million and taxable income of $20 million for the year ended December 31, 2021. The 2021 tax rate is 25%. The onl...

Q: Arnold Industries has pretax accounting income of $32 million for the

Arnold Industries has pretax accounting income of $32 million for the year ended December 31, 2021. The tax rate is 25%. The only difference between accounting income and taxable income relates to an...

Q: Bronson Industries reported a deferred tax liability of $5 million for

Bronson Industries reported a deferred tax liability of $5 million for the year ended December 31, 2020, related to a temporary difference of $20 million. The tax rate was 25%. The temporary differenc...

Q: On January 1, 2018, Ameen Company purchased major pieces of

On January 1, 2018, Ameen Company purchased major pieces of manufacturing equipment for a total of $36 million. Ameen uses straight-line depreciation for financial statement reporting and MACRS for in...

Q: Shwonson Industries reported a deferred tax asset of $5 million for

Shwonson Industries reported a deferred tax asset of $5 million for the year ended December 31, 2020, related to a temporary difference of $20 million. The tax rate was 25%. The temporary difference i...

Q: The information that follows pertains to Esther Food Products: a

The information that follows pertains to Esther Food Products: a. At December 31, 2021, temporary differences were associated with the following future taxable (deductible) amounts: Depreciation $60,0...

Q: The information that follows pertains to Richards Refrigeration, Inc.:

The information that follows pertains to Richards Refrigeration, Inc.: a. At December 31, 2021, temporary differences existed between the financial statement book values and the tax bases of the follo...