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Quiz #2 (2013 Winter).docx

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University of Alberta
Jason Lee

UNIVERSITY OFALBERTA SCHOOL OF BUSINESS DEPARTMENT OFAOIS ACCOUNTING 415 – Quiz #2 Instructor: Jason Lee March 27, 2013 Student: I.D. Number: ************************************************************************************** THIS QUIZ CONSISTS OF 2 QUESTIONS ON PAGES 2 TO 6. ************************************************************************************** INSTRUCTIONS and FORMULAS: 1. Be sure to state any assumptions that you find necessary and show all calculations. 2. Answer each question in the space provided. 3. You have 35 minutes to complete this quiz. Present Value Factors Lump Sum: 1 (1+i) Annuity: 1 1 1− n i{ 1+i )} 1 MARKALLOCATION: Maximum marks Marks awarded Question 1 12 Question 2 23 Total 35 2 Question 1 (12 marks) Maher Inc. reports the following income (loss) figures for both accounting and tax purposes: Year Income (Loss) Tax Rate 2009 $3,100,000 30% 2010 1,700,000 30% 2011 1,100,000 35% 2012 600,000 35% 2013 (5,200,000) 35% Maher Inc. is a TSX-listed firm. For any loss, the firm always uses the loss carryback provision first. Required: (Note that the required includes parts A, B, and C below.) A. At the end of 2013, the firm determines that it is probable that it will realize the loss carryforward benefits in the future. It also expects that the tax rate will remain at 35% in the future. Prepare the journal entries to record income taxes for the year 2013. (5 marks) 3 B. Prepare the bottom of the income statement for 2013, beginning with the line “Income (loss) before income taxes.” (3 marks) C. Instead, suppose that Maher Inc. applies ASPE and uses the valuation allowance approach. At the end of 2013, the firm determines that it is more likely than not that 40% of the loss carryforward benefits will not be realized. Prepare the journal entries for the future income tax asset and related account(s) for the year 2013, assuming that Maher Inc. uses the loss carryback provision first. (4 marks) 4 Question 2 (26 marks) Hilton Corporation sponsors a non-contributory defined bene
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