At the End of Its First Year of Operations on December

question 47

Multiple Choice

At the end of its first year of operations on December 31, 2010, the Belton Company reported taxable income of $100, 000 and had a pretax financial loss of $60, 000.Differences between taxable income and pretax financial income included interest revenue received from municipal obligations of $20, 000 and warranty expense accruals of $180, 000.Warranty expenses of $90, 000 are expected to be paid in 2011 and $110, 000 in 2012.The enacted income tax rates for 2010, 2011, and 2012 are 30%, 35%, and 40%, respectively.The journal entry to record income tax expense on December 31, 2010, would be

• A)
• \(\begin{array} { l r }
• \text { Deferred Tax Asset } & 75,500 \\
• \text { Income Taxes Payable } & 30,000 \\
• \text { Income Tax Benefits from } & \\
• \text { Operating Loss Carryforward } & 45,500
• \end{array}\)
• B)
• \(\begin{array} { l r }
• \text { Deferred Tax Asset } & 30,000 \\
• \text { Income Taxes Payable } && 30,000
• \end{array}\)
• C)
• \(\begin{array} { c r }
• \text { Income Tax Expense } & 30,000 \\
• \text { Income Taxes Payable } & 30,000
• \end{array}\)
• D)
• \(\begin{array} { l r }
• \text { Deferred Tax Asset } & 105,500 \\
• \text { Income Taxes Payable } & 30,000 \\
• \text { Income Tax Benefit from } & \\
• \text { Operating Loss Carryforward } & 75,500
• \end{array}\)

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Definitions:

Pricing Practices

Various strategies and methodologies businesses adopt to set and adjust the prices of their products or services.

Product Development

The process of ideating, designing, creating, and bringing a new product to the market to meet consumer needs or market niches.

Product Sales Organization

A structured setup within a company focused on the selling of products, including the strategies, processes, and personnel involved.

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