Exam 19: Accounting for Income Taxes

FASB Statement No.109 allows the recognition of a deferred tax asset, subject to an asset impairment test.Discuss what criteria a company should employ to determine whether a deferred tax asset is considered impaired.

Exhibit 19-1 On December 31, 2009, Fort Stockton, Inc.had no temporary differences that created deferred income taxes.On January 2, 2010, a new machine was purchased for $30, 000.Straight-line depreciation over a four-year life (no residual value)was used for financial accounting.Depreciation expense for tax purposes was $11, 000 in 2010, $9, 000 in 2011, $6, 000 in 2012, and $4, 000 in 2013.In each year, the income tax rate was 20% and Fort Stockton had no other items that created differences between pretax financial income and taxable income.Fort Stockton reported the following pretax financial income for 2010 through 2013: 2010 \ 50,000 2011 40,000 2012 30,000 2013 60,000 -Refer to Exhibit 19-1.The entry to record income taxes on December 31, 2012, would include a

Assuming there are no prior period adjustments during the fiscal year, net income would be affected by Interperiod Income Intraperiod Incom Tax Allocation Tax Allocation I. Yes Yes II. No No III. Yes No IV No Yes

When accounting for the current impact of loss carrybacks and carryforwards it is proper to

All of the following are conclusions reached by the FASB regarding accounting for deferred taxes except

In pushing for comprehensive allocation of income taxes, FASB argued that

Briefly describe the four major differences between IFRS and GAAP in the measurement procedures used in accounting for deferred income taxes.

In 2010, the San Marcos Company received insurance proceeds of $300, 000 payable upon the death of its previous top executive officer.For financial reporting purposes, San Marcos included the $300, 000 in pretax accounting income.The life insurance proceeds are exempt from income taxes.Assuming an income tax rate of 30%, what should be reported as deferred income taxes in the 2010 income statement of San Marcos for this event?

The amount owed the IRS is recorded in the accounting records in which account?

The Alamo Heights Company installs sprinkler systems for large manufacturing enterprises and golf courses.Due to the design of their systems, some projects frequently extend over a two-year period.Alamo Heights uses the percentage-of-completion method for financial accounting purposes and the completed-contract method for tax purposes.As of December 31, 2010, all projects were completed.The following information relates to projects started but not completed as of December 31, 2011: Assuming an income tax rate of 30%, what amount should be included in the deferred tax liability account at December 31, 2011?

For the year ended December 31, 2010, the Huntsville Company reported income of $350, 000 before provision for income tax.In arriving at taxable income for income tax purposes, the following differences were identified: Assuming a corporate income tax rate of 30%, Huntsville's current income tax liability as of December 31, 2010, is

The Channelview Company incurred the following expenses in 2010, which are reported differently for financial reporting purposes and taxable income: Estimate of bad debts expense (but not written off) $\quad \$ 40,000$ Estimated product warranity costs (but not paic) 20,000 If the tax rate is 40%, the total temporary difference is

Which one of the following statements regarding operating losses is not true?

FASB Statement No.109 addressed both interperiod and intraperiod tax allocation issues.Discuss both interperiod and intraperiod tax allocation methods.