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Topic: QUESTION OF THE DAY - MCQ’S ALL SECTIONS (

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AndrewCPA
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Joined: 31 Dec 2009
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Posted: 19 Oct 2010 at 18:59 \| IP Logged

Today's question: FAR

West Corp. leased a building and received the $36,000 annual rental payment on June 15, 2009. The beginning of the lease was July 1, 2009. Rental income is taxable when received. West's tax rates are 30% for 2009 and 40% thereafter. West has elected early adoption of FASB Statement No. 109, Accounting for Income Taxes. West had no other permanent or temporary differences. West determined that no valuation allowance was needed. What amount of deferred tax asset should West report in its December 31, 2009, balance sheet?

A) $5,400

B) $7,200

C) $10,800

D) $14,400

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Skooby
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Joined: 23 Mar 2010
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Posted: 20 Oct 2010 at 07:49 \| IP Logged

A - $5,400

AndrewCPA
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Posted: 20 Oct 2010 at 14:53 \| IP Logged

Correct Answer: B

Explanation: The annual rent of $36,000 is taxable in 1999 but only $18,000 is considered rental income for financial purposes. This creates a temporary difference of $18,000 which will be taxed at the future enacted tax rate of 40%. Therefore, the deferred tax asset at December 31, 2009 is $7,200 ($18,000 x 40%).

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AndrewCPA
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Posted: 20 Oct 2010 at 14:58 \| IP Logged

Today’s question: BEC

In manufacturing its products for the month of March 2009, Elk Co. incurred normal spoilage of $5,000 and abnormal spoilage of $9,000. How much spoilage cost should Elk charge as a period cost for the month of March 2009?

A) $0

B) $5,000

C) $9,000

D) $14,000

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herbert7890
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Joined: 31 May 2010
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Posted: 21 Oct 2010 at 06:24 \| IP Logged

C) $9,000

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