Black, Inc Black, Inc Black, Inc

question 42

Essay

Black, Inc., is a domestic corporation with the following balance sheet for book and tax purposes at the end of the
year. Assume a 21% corporate tax rate and no valuation allowance. $\begin{array}{lcc}&\text { Tax Debit/(Credit)} &\text {Book Debit/(Credit) }\\\text { Assets }\\ \text { Cash } & \$ 300 & 300 \\\text { Accounts receivable } & 5,000 & 5,000 \\\text { Buildings } & 300,000 & 300,000 \\ \text { Accumulated depreciation } & (150,000) & (80,000) \\ \text { Furniture \& fixtures } & 40,000 & 40,000 \\\text { Accumulated depreciation } & (21,000) & (15,000) \\ \text { Total Assets } & \$ 174,300 & \$ 250,300 \\\end{array}$

$\begin{array}{l}\text { Liabilities }\\\begin{array}{lrr}\text { Accrued litigation expense } & \$-0- & (\$ 27,000) \\\text { Note payable } & \underline{(116,000)}& \underline{(116,000)} \\\text { Total liabilities } & \underline{(\$ 116,000)} & (\$143,000) \\\end{array}\end{array}$

$\begin{array}{lcc} \text { Paid-in capital } & (\$ 1,000) & (\$ 1,000) \\ \text { Retained earnings } & (57,300) & (106,300) \\ \begin{array}{l}\text { Total liabilities and } \\\text { stockholders' equity }\end{array} & (\$ 174,300) & (\$ 250,300) \\\end{array}$ Black, Inc.'s, gross deferred tax assets and liabilities at the beginning of Black's year are listed below. $\begin{array}{lc}&\text { Beginning of Year }\\\text { Accrued litigation expense } & \underline{\$ 20,000} \\\text { Subtotal } & \$ 20,000 \\\text { Applicable tax rate } & \underline{\times 21 \%} \\\text { Gross deferred tax asset } & \$ 4,200 \\\\\text { Building - } \\\quad \text { Accumulated depreciation } & (\$ 61,000) \\\text { Furniture \& fixtures - } & \\\quad \text { Accumulated depreciation } & \underline{(3,000)} \\\text { Subtotal } & (\$ 64,000) \\\text { Applicable tax rate } & \times 21 \% \\\text { Gross deferred tax liability } & \underline{(\$ 13,440)} \\\end{array}$ Black, Inc.'s, book income before tax is $6,000. Black records two permanent book-tax differences.
It earned $250 in tax-exempt municipal bond interest and incurred $500 in nondeductible business meals expense. Determine the change in Black's deferred tax liabilities for the current year.

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Definitions:

Debriefing

At the end of a study, the procedure in which participants are assessed for suspicion and then receive a gentle explanation of the true nature of the study in a manner that counteracts any negative effects of the study experience.

Informed Consent

A principle that requires providing all necessary information about a procedure or research study to participants, allowing them to voluntarily decide whether to participate.

Experimenter Biasing

Refers to a situation in research where the expectations or preferences of the researcher inadvertently influence the participants or the results of the study.

Demand Characteristics

Subtle cues or signals in an experimental environment that influence the participants' behavior or responses.