91. A company is using the straight-line method for amortizing its capital assets for financial accounting purposes and CCA for tax purposes. If the net book value of the asset were greater than the...

91. A company is using the straight-line method for amortizing its capital assets for financial accounting purposes and CCA for tax purposes. If the net book value of the asset were greater than the undepreciated capital cost, what would the company report on their balance sheet?

A. A current future tax asset
B. A current future tax liability
C. A non-current future tax asset
D. A non-current future tax liability

92. Which of the following best describes a future tax liability (FTL)?

A. A FTL arises when the company does not pay all of its taxes due in the current year.
B. A FTL arises when there are temporary differences between the income as calculated on the financial statements and on the tax return.
C. A FTL arises when there are permanent differences between the income as calculated on the financial statements and on the tax return.
D. A FTL arises when the company has paid tax in advance of when it is due.

93. What is the method called when a company calculates their income tax expense on the cash basis?

A. Taxes payable method
B. Temporary taxes method
C. Tax allocation method
D. Cash payable method

94. If a company uses the taxes payable method of calculating income tax expense, which of the following statements would be true?

A. The income tax expense would be equal to the income taxes payable.
B. The income tax expense would be greater than the income taxes payable.
C. The income tax expense would be less than the income taxes payable.
D. The current income tax expense would be equal to the future income tax expense.

95. During its first year of operations, Choy Limited had sales of $765,000. The company offers a 2-year limited warranty on all sales and expects that warranty costs for the first year will average 0.5% of sales with an additional 1.5% in the second year. During the current year the company spent $12,000 on warranty repairs.



Required:


A) Prepare all journal entries related to the warranty for the current year.
B) How would the warranty liability be reported on the company's year-end balance sheet?