Multiple choice questions on DTA, temporary differences etc.

1. Major reasons for disclosure of deferred income tax information is (are)
a.better assessment of quality of earnings.
b.better predictions of future cash flows.
c.that it may be helpful in setting government policy.
d.all of these.

2. Which of the following will not result in a temporary difference?
a.Product warranty liabilities
b.Advance rental receipts
c.Installment sales
d.All of these will result in a temporary difference.

3. The relationship between the amount funded and the amount reported for pension expense is as follows:
a.pension expense must equal the amount funded.
b.pension expense will be less than the amount funded.
c.pension expense will be more than the amount funded.
d.pension expense may be greater than, equal to, or less than the amount funded.

4. In accounting for a pension plan, any difference between the pension cost charged to expense and the payments into the fund should be reported as
a.an offset to the liability for prior service cost.
b.accrued or prepaid pension cost.
c.an accrued actuarial liability.
d.a charge or credit to unrealized appreciation and depreciation.

5. An intangible asset (deferred pension cost) is created when
a.the accumulated benefit obligation exceeds the fair value of pension plan assets, but accrued pension cost and unrecognized prior service cost is greater than this excess.
b.the accumulated benefit obligation exceeds the fair value of pension plan assets, but accrued pension cost is less than this excess, and unrecognized prior service cost exists.
c.pension plan assets at fair value exceed the accumulated benefit obligation.
d.pension plan assets at book value exceed the projected benefit obligation.

6. The methods of accounting for a lease by the lessee are
a.operating and capital lease methods.
b.operating, sales, and capital lease methods.
c.operating and leveraged lease methods.
d.none of these.

7. The Lease Liability account should be disclosed as
a.all current liabilities.
b.all noncurrent liabilities.
c.current portions in current liabilities and the remainders in noncurrent liabilities.
d.deferred credits.

8. Which of the following is shown on a statement of cash flows?
a.A stock dividend
b.A stock split
c.An appropriation of retained earnings
d.None of these

9. The net cash provided by operating activities in Moon Company's statement of cash flows for 2004 was $154,000. For 2004, depreciation on plant assets was $60,000, amortization of goodwill was $10,000, and cash dividends paid on common stock was $72,000. Based only on the information given above, Moon's net income for 2004 was
a.$154,000.
b.$84,000.
c.$12,000.
d.$156,000.

10. Equipment which cost $138,000 and had accumulated depreciation of $74,000 was sold for $72,000. This transaction should be shown on the statement of cash flows (indirect method) as a(n)
a.addition to net income of $8,000 and a $72,000 cash inflow from financing activities.
b.deduction from net income of $8,000 and a $64,000 cash inflow from investing activities.
c.deduction from net income of $8,000 and a $72,000 cash inflow from investing activities.
d.addition to net income of $8,000 and a $64,000 cash inflow from financing activities.