Gammell, Inc. reported net income of $40,000 for 2009. The income tax return exc

Question

Gammell, Inc. reported net income of $40,000 for 2009. The income tax return excluded an expense item of $3,000 (reported on the income statement) because under the tax laws the $3,000 would not be reported for tax purposes until 2010. Assuming a 35% income tax rate, this situation would cause a 2009 deferred tax amount of:
A. $3,000 debit
B. $3,000 credit
C. $1,050 debit
D. $1,050 credit

2nd Part-

Gammell issued $50,000 bonds payable, 9% annual interest, maturity in ten years. The bonds were issued at $52,000. Gammell uses straight-line amortization. The amount of interest expense each full year would be:
A. $4,700
B. $4,300
C. $4,500
D. $4,680

Explanation / Answer

c) It would be considered prepaid taxes. b) 50,000*.09 less 200 amortized bond premium.

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