Horner Corporation has a deferred tax asset at December 31, 2015 of $80,000 due to the recognition of potential tax benefits of an operating loss carryforward. The enacted tax rates are as follows: 40% for 2012-2014; 35% for 2015; and 30% for 2016 and thereafter. Assuming that management expects that only 60% of the related benefits will actually be realized, a valuation account should be established in the amount of: a. $80,000 b. $32,000 C. $28,000 d. $24,000

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Horner Corporation has a deferred tax asset at
December 31, 2015 of $80,000 due to the
recognition of potential tax benefits of an operating
loss carryforward. The enacted tax rates are as
follows: 40% for 2012-2014; 35% for 2015; and
30% for 2016 and thereafter. Assuming that
management expects that only 60% of the related
benefits will actually be realized, a valuation
account should be established in the amount of:
a. $80,000
b. $32,000
C. $28,000
d.
$24,000
Use the following information for questions 5 and 6.
Rowen, Inc. had pre-tax accounting income of
$1,672,000 and a tax rate of 40% in 2015, its first year of
operations. During 2015 the company had the following
transactions:
4.
Received rent from Jane, Co. for 2016
Municipal bond income
Depreciation for tax purposes in excess of book
depreciation
Installment sales revenue to be collected in 2016
5.
For 2015, what is the amount of income taxes
payable for Rowen, Inc?
$603,200
$654,400
$686,400
$772,800
a.
b.
$64,000
$80,000
$40,000
$108,000
d.
Transcribed Image Text:Horner Corporation has a deferred tax asset at December 31, 2015 of $80,000 due to the recognition of potential tax benefits of an operating loss carryforward. The enacted tax rates are as follows: 40% for 2012-2014; 35% for 2015; and 30% for 2016 and thereafter. Assuming that management expects that only 60% of the related benefits will actually be realized, a valuation account should be established in the amount of: a. $80,000 b. $32,000 C. $28,000 d. $24,000 Use the following information for questions 5 and 6. Rowen, Inc. had pre-tax accounting income of $1,672,000 and a tax rate of 40% in 2015, its first year of operations. During 2015 the company had the following transactions: 4. Received rent from Jane, Co. for 2016 Municipal bond income Depreciation for tax purposes in excess of book depreciation Installment sales revenue to be collected in 2016 5. For 2015, what is the amount of income taxes payable for Rowen, Inc? $603,200 $654,400 $686,400 $772,800 a. b. $64,000 $80,000 $40,000 $108,000 d.
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