A company has set up an unfunded deferred compensation plan for its executives. It accrues an expense on its income statement of $5 million per year, but the income tax deduction for these expenses is not taken until deferred compensation is paid out in the future. If the company has a 40% marginal tax rate and a 32% effective tax rate, each year in which the company funds the plan it will recognize a

Deferred tax assets = $2 million

Explanation:

Given:

Total expenses on income statement = $5 million

Marginal tax rate = 40%

Effective tax rate = 32%

Find:

Deferred tax assets

Computation:

Deferred tax assets = Total expenses on income statement x Marginal tax rate

Deferred tax assets = 5 million x 40%

Deferred tax assets = $2 million

Memo to the College President

New Stadium Scoreboard:

1. Topic Sentence:

5. The old scoreboard should be replaced for many reasons.

2. Sentence(s) for separate paragraph:

4. Coca-Cola has offered to buy a new sports scoreboard in return for exclusive rights to sell soda pop on campus.

3. Support Sentences:

1. The old scoreboard is a tired warhorse that was originally constructed in the 1970s.

2. It is now hard to find replacement parts when something breaks.

3. The old scoreboard is not energy efficient.

6. It shows only scores for football games.

7. When we have soccer games or track meets, we are without any functioning scoreboard.

Explanation:

1. Topic Sentence:

This is the theme or main topic of a paragraph that summarizes the information in the paragraph.  It may be the first sentence or inserted elsewhere in the paragraph.  But, all other sentences within the paragraph support it with points, reasons, or examples.

2. Support Sentences:

These are sentences that support the topic sentence by offering justifications and examples.

3. Separate Paragraph Sentence:

This is a sentence that introduces another idea which is not closely related to the idea contained in the other paragraph.