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NEW QUESTION: 1
A. Option B
B. Option D
C. Option A
D. Option C
Answer: D
NEW QUESTION: 2
Endowment policies are similar to___________ policies in that premiums are usually level through the term of policy and the policies build cash values.
A. Whole life insurance
B. Universal life insurance
C. Permanent life insurance
D. Straight life insurance
Answer: C
NEW QUESTION: 3
During the first quarter of 1993, Tech Co. had income before taxes of $200,000, and its effective income
tax rate was 15%. Tech's 1992 effective annual income tax rate was 30%, but Tech expects its 1993
effective annual income tax rate to be 25%. In its first quarter interim income statement, what amount of
income tax expense should Tech report?
A. $30,000
B. $0
C. $50,000
D. $60,000
Answer: C
Explanation:
Choice "c" is correct. Interim period tax expense is the estimated annual effective tax rate (25% in this
case) applied to the year-to-date income before taxes minus the tax expense recognized in previous
interim periods. Since this question involves the first quarter, there are no previous interim periods. 25% *
$ 200,000 = $50,000. FIN 18, para. 16
Choice "a" is incorrect. Income tax expense is reported in interim income statements.
Choice "b" is incorrect. The 1993 annual estimated tax rate, not the first quarter effective tax rate, is used
to calculate income tax expense for interim statements.
Choice "d" is incorrect. The 1993 annual estimated tax rate, not the 1992 annual effective tax rate, is used
to calculate income tax expense for interim statements.
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