In 2010, Its First Year of Operations, Wichita Falls Company

question 58

Multiple Choice

In 2010, its first year of operations, Wichita Falls Company reported pretax accounting income of $60, 000.Included in the $60, 000 was an expense for accrued, unpaid warranty costs of $8, 000, which are not deductible until paid for income tax purposes.Wichita Falls' income tax rate was 20%.The entry to record the income tax expense would include a

• A)credit to Income Tax Expense for $12, 000
• B)credit to Income Taxes Payable for $12, 000
• C)credit to Deferred Tax Liability for $1, 600
• D)debit to Deferred Tax Asset for $1, 600

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Definitions:

Graphing Calculator

A handheld or software tool that plots graphs, solves equations, and performs other mathematical calculations.

Pythagorean Theorem

A fundamental relation in Euclidean geometry among the three sides of a right triangle, stating that the square of the hypotenuse is equal to the sum of the squares of the other two sides.

Radical Equation

An equation in which the variable is contained within a radical symbol or has a radical expression with the variable.

Cube Root

The number that produces a given number when cubed, essentially the cube root of a number is a value that, when multiplied by itself three times, gives the original number.