Sherman Company Uses an Accelerated Depreciation Method for Income Tax

question 20

Multiple Choice

Sherman Company uses an accelerated depreciation method for income tax purposes and the straight-line depreciation method for financial reporting purposes.As of December 31, 2010, Sherman has a deferred tax liability balance related to depreciation temporary differences of $80, 000.In 2011, depreciation for income tax purposes was $260, 000, while depreciation for financial reporting purposes was $200, 000.If the income tax rate is 30%, no other temporary or permanent differences exist, and taxable income is $300, 000, the entry to record income tax expense on December 31, 2011, would include a

• A)debit to Income Tax Expense for $108, 000
• B)credit to Income Taxes Payable for $108, 000
• C)debit to Deferred Tax Asset for $24, 000
• D)credit to Deferred Tax Liability for $24, 000

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Definitions:

Associative Memory

A form of memory that links related information, allowing the recall of an associated item when a related cue is presented.

Memory Scanning

The mental process of searching through stored information in memory to find a specific piece of data.

Reaction Times

The duration of time it takes from the presentation of a stimulus to the onset of a motor response.

Ability

The possession of the means or skill to do something.