Question 1

Discuss what criteria a company should employ to determine whether a deferred tax asset is considered impaired or "more likely than not" to be realized.

Accepted Answer

A valuation allowance is required (or th...

Question 2

Deferred tax liabilities and deferred tax assets must be reported on the balance sheet.
Required:
Explain the process of classifying and reporting deferred tax liabilities and deferred tax assets.

Accepted Answer

A corporation must report its deferred t...

Question 3

On January 1, 2014, Bedrock Company began recognizing revenues from all sales under the accrual method for financial reporting purposes and under the installment sales method for income tax purposes. Bedrock reported the following gross margin on sales for 2014 and 2015:

The enacted tax rate for both 2014 and 2015 was 30%. Assuming there are no other temporary differences, Bedrock's December 31, 2015 balance sheet would report a deferred tax liability of

Accepted Answer

A)   $ 60,000
B)   $120,000
C)   $180,000
D)   $450,000E) B) and D)
F) All of the above

Question 4

Delmarva Company, during its first year of operations in 2014, reported taxable income of $170,000 and pretax financial income of $100,000. The difference between taxable income and pretax financial income was caused by two timing differences: excess depreciation on tax return, $70,000; and warranty expenses in excess of warranty payments, $40,000. These two timing differences will reverse in the next three years as follows:

Enacted tax rates are 30% for 2014, 35% for 2015 and 2016, and 40% for 2017.
Required:
Prepare the income tax journal entry for Delmarva Company for December 31, 2014.

Accepted Answer

The answer of Delmarva Company, during its first year of...

Question 5

Lakeland Corporation reported the following pretax (and taxable) information for 2014: 
Required: 
a.Prepare the lower portion of Lakeland's 2014 income statement, beginning with pretax income for continuing operations. (Omit the heading.)
b.Prepare Lakeland's 2014 statement of retained earnings, assuming that retained earnings at January 1, 2014, was $750,000 and the company paid $45,000 of dividends in 2014. (Omit the heading.)

Accepted Answer

The answer of Lakeland Corporation reported the following pretax (and...

Question 6

All of the following involve a temporary difference for purposes of income tax allocation except

Accepted Answer

A)   interest on municipal bonds
B)   gross profit on installment sales for tax purposes
C)   MACRS depreciation for tax purposes and straight-line for accounting purposes
D)   product warranty expensesE) B) and D)
F) C) and D)

Question 7

Which of the following statements regarding current and deferred income taxes is not correct?

Accepted Answer

A)   The amount of income tax expense must be allocated to various components of comprehensive income.
B)   The income tax obligation is determined by applying the historical tax rates to the taxable income for the year.
C)   The valuation allowance account is subtracted from the deferred tax asset account on the balance sheet.
D)   Rent received in advance that will be earned within the next 12 months results in the creation of a current deferred tax asset.E) B) and D)
F) B) and C)

Question 8

At the end of its first year of operations on December 31, 2014, the Brandon Company reported taxable income of $100,000 and had a pretax financial loss of $60,000. Differences between taxable income and pretax financial income included interest revenue received from municipal obligations of $20,000 and warranty expense accruals of $180,000. Warranty expenses of $90,000 are expected to be paid in 2015 and $110,000 in 2016. The enacted income tax rates for 2014, 2015, and 2016 are 30%, 35%, and 40%, respectively. The journal entry to record income tax expense on December 31, 2014, would be

Accepted Answer

A)   Deferred Tax Asset  \quad \quad \quad  75,500 Income Taxes Payable  \quad \quad  30,000Income Tax Benefits fromOperating Loss Carryforward  \quad \quad  45,500
B)   Deferred Tax Asset \quad \quad   30,000 Income Taxes Payable  \quad \quad \quad \quad  30,000
C)   Income Tax Expense \quad \quad \quad   30,000 Income Taxes Payable  \quad \quad  30,000
D)   Deferred Tax Asset  \quad \quad \quad  105,500 Income Taxes Payable  \quad \quad  30,000Income Tax Benefit fromOperating Loss Carryforward  \quad \quad  75,500 E) None of the above
F) A) and C)

Question 9

At the end of its first year of operations on December 31, 2014, the Mojave Company reported pretax financial income of $100,000. An investigation of that income revealed the following items: 
•Bad debts expense of $12,000 was recognized. The accounts will be written off in 2015.
•Installment sales of $50,000 were recognized in financial income. These sales were accounted for by the installment sales method for income tax purposes. Only $20,000 was reported on the tax return.
•Warranty expenses of $16,000 were accrued for financial reporting purposes, but were not expected to result in a cash payment until 2015.
•Depreciation on the tax return exceeded depreciation for financial reporting purposes by $32,000.
Assume that any deferred tax assets are considered more likely than not to be realized. The enacted income tax rate for all years is 25%.
Required:
a.Compute taxable income.
b.Prepare the entry to record income tax expense and any related assets and liabilities for Mojave on December 31, 2014.

Accepted Answer

The answer of At the end of its first year...

Question 10

Which of the following are required disclosures related to uncertain tax positions?

Accepted Answer

A)   the management discussion of the tax position in which management believes with reasonable probability that significant changes will take place within 12 months
B)   a reconciliation of beginning and ending balances of the unrecognized tax benefits
C)   the total amount of the unrecognized tax benefit that would affect the effective tax rate if recognized.
D)   All of these choicesE) A) and C)
F) All of the above

Question 11

James Company reports the following information related to their deferred tax items at the end of 2015:

Required:
Show how the information would be reported on Jame's December 31, 2015, balance sheet.

Accepted Answer

The answer of James Company reports the following information related...

Question 12

The acceptable balance sheet classifications for deferred tax assets and deferred tax liabilities under GAAP and IFRS are

Accepted Answer

A)   I
B)   II
C)   III
D)   IVE) None of the above
F) A) and B)

Question 13

What disclosures are required for "uncertain tax positions" where the position is "more likely than not" of being upheld during a tax audit by the IRS?

Accepted Answer

* a table that reconciles the beginning ...

Question 14

In 2014, its first year of operations, Wilber Company reported pretax accounting income of $60,000. Included in the $60,000 was an expense for accrued, unpaid warranty costs of $8,000, which are not deductible until paid for income tax purposes. Wilber's income tax rate was 20%. The entry to record the income tax expense would include a

Accepted Answer

A)   credit to Income Tax Expense for $12,000
B)   credit to Income Taxes Payable for $12,000
C)   credit to Deferred Tax Liability for $1,600
D)   debit to Deferred Tax Asset for $1,600E) B) and C)
F) C) and D)

Question 15

For each item listed below, indicate whether it involves a: 
a.permanent difference.
b.temporary difference that will result in future deductible amounts (giving rise to deferred tax assets).
c.temporary difference that will result in future taxable amounts (giving rise to deferred tax liabilities).
 
Required:
Match each item to its descriptive phrase by placing the appropriate letter in the space provided.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30">_TB6205_00...

Question 16

Life insurance proceeds payable to a corporation upon the death of an insured employee are an example of

Accepted Answer

A)   intraperiod tax allocation
B)   interperiod tax allocation
C)   a permanent difference
D)   a temporary differenceE) None of the above
F) B) and C)

Question 17

Which of the following transactions would typically result in the creation of a deferred tax liability?

Accepted Answer

A)   Rents received in advance are taxable when received but are not recognized in pretax financial income until earned.
B)   Gross profit on installment sales is recognized currently in pretax financial income but is not taxable for income tax purposes until cash is received.
C)   Losses recognized in pretax accounting income from an investment in a subsidiary are accounted for by the equity method but not deductible for income tax purposes until the investment is sold.
D)   A contingent liability is recognized as an expense currently in pretax financial income but not deductible for income tax purposes until paid.E) None of the above
F) A) and B)

Question 18

Interperiod income tax allocation is based on the assumption that

Accepted Answer

A)   permanent differences ultimately reverse and require interperiod tax allocation
B)   permanent differences do not have deferred tax consequences
C)   total income tax expense should be apportioned among numerous line items on the income statement
D)   the amount of income tax expense reported on the income statement should be the same as the income tax obligation on the corporation's income tax returnE) C) and D)
F) B) and D)

Question 19

What conclusion did FASB come to in regards to GAAP for the financial reporting of operating loss carrybacks and carryforwards?

Accepted Answer

1) A corporation must recognize the tax ...

Question 20

Identify the three essential characteristics of an asset and explain how deferred tax assets meet these characteristics.

Accepted Answer

(1) An asset must have probable future b...

Exam 18: Accounting for Income Taxes

What conclusion did FASB come to in regards to GAAP for the financial reporting of operating loss carrybacks and carryforwards?

Correct Answer
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1) A corporation must recognize the tax ...
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Correct Answer
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_TB6205_00...
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Correct Answer
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Which of the following transactions would typically result in the creation of a deferred tax liability?

Correct Answer
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Which of the following are required disclosures related to uncertain tax positions?

Correct Answer
verified

Life insurance proceeds payable to a corporation upon the death of an insured employee are an example of

Correct Answer
verified

Identify the three essential characteristics of an asset and explain how deferred tax assets meet these characteristics.

Correct Answer
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(1) An asset must have probable future b...
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Correct Answer
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Interperiod income tax allocation is based on the assumption that

Correct Answer
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Which of the following statements regarding current and deferred income taxes is not correct?

Correct Answer
verified

Correct Answer
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James Company reports the following information related to their deferred tax items at the end of 2015: Required: Show how the information would be reported on Jame's December 31, 2015, balance sheet.

Correct Answer
verified

Deferred tax liabilities and deferred tax assets must be reported on the balance sheet. Required: Explain the process of classifying and reporting deferred tax liabilities and deferred tax assets.

Correct Answer
verified
A corporation must report its deferred t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Discuss what criteria a company should employ to determine whether a deferred tax asset is considered impaired or "more likely than not" to be realized.

Correct Answer
verified
A valuation allowance is required (or th...
View Answer

The acceptable balance sheet classifications for deferred tax assets and deferred tax liabilities under GAAP and IFRS are

Correct Answer
verified

What disclosures are required for "uncertain tax positions" where the position is "more likely than not" of being upheld during a tax audit by the IRS?

Correct Answer
verified
* a table that reconciles the beginning ...
View Answer

All of the following involve a temporary difference for purposes of income tax allocation except

Correct Answer
verified

Exam 18: Accounting for Income Taxes

What conclusion did FASB come to in regards to GAAP for the financial reporting of operating loss carrybacks and carryforwards?

Correct Answerverified1) A corporation must recognize the tax ...View AnswerShow Answer

Correct Answerverified_TB6205_00...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Which of the following transactions would typically result in the creation of a deferred tax liability?

Correct AnswerverifiedShow Answer

Which of the following are required disclosures related to uncertain tax positions?

Correct AnswerverifiedShow Answer

Life insurance proceeds payable to a corporation upon the death of an insured employee are an example of

Correct AnswerverifiedShow Answer

Identify the three essential characteristics of an asset and explain how deferred tax assets meet these characteristics.

Correct Answerverified(1) An asset must have probable future b...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Interperiod income tax allocation is based on the assumption that

Correct AnswerverifiedShow Answer

Which of the following statements regarding current and deferred income taxes is not correct?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

James Company reports the following information related to their deferred tax items at the end of 2015: Required: Show how the information would be reported on Jame's December 31, 2015, balance sheet.

Correct AnswerverifiedShow Answer

Deferred tax liabilities and deferred tax assets must be reported on the balance sheet. Required: Explain the process of classifying and reporting deferred tax liabilities and deferred tax assets.

Correct AnswerverifiedA corporation must report its deferred t...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Discuss what criteria a company should employ to determine whether a deferred tax asset is considered impaired or "more likely than not" to be realized.

Correct AnswerverifiedA valuation allowance is required (or th...View AnswerShow Answer

The acceptable balance sheet classifications for deferred tax assets and deferred tax liabilities under GAAP and IFRS are

Correct AnswerverifiedShow Answer

What disclosures are required for "uncertain tax positions" where the position is "more likely than not" of being upheld during a tax audit by the IRS?

Correct Answerverified* a table that reconciles the beginning ...View AnswerShow Answer

All of the following involve a temporary difference for purposes of income tax allocation except

Correct AnswerverifiedShow Answer

Correct Answer
verified
1) A corporation must recognize the tax ...
View Answer

Correct Answer
verified
_TB6205_00...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
(1) An asset must have probable future b...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A corporation must report its deferred t...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A valuation allowance is required (or th...
View Answer

Correct Answer
verified

Correct Answer
verified
* a table that reconciles the beginning ...
View Answer

Correct Answer
verified