Under the accrual method,what is the effect of the tax rate change in F2014? \[\begin{array} { | l | r | r | r | } \hline & \text { F2013 } & \text { F2014 } & \text { F2015 } \\ \hline \text { Deferred tax liability } & 30,000 & & \\ \hline \text { Revenue } & & 130,000 & 150,000 \\ \hline \text { Taxable income } & & 95,000 & 105,000 \\ \hline \text { Tax rate } & 30 \% & 35 \% & 35 \% \\ \hline \end{array}\]

A) Increase of 5,000. B) Decrease of 5,000. C) Increase of 27,500. D) Decrease of 27,500. A) Increase of 5,000. B) Decrease of 5,000. C) Increase of 27,500. D) Decrease of 27,500.

What is the tax expense under the deferral method for F2014? \[\begin{array} { | l | r | r | r | } \hline & \text { F2013 } & \text { F2014 } & \text { F2015 } \\ \hline \text { Income before tax } & 120,000 & 110,000 & 120,000 \\ \hline \text { Taxable income } & 85,000 & 95,000 & 105,000 \\ \hline \text { Tax rate } & 30 \% & 25 \% & 30 \% \\ \hline \end{array}\]

A) $23,750 B) $25,500 C) $27,500 D) $36,000 A) $23,750 B) $25,500 C) $27,500 D) $36,000

What is the ending balance of deferred taxes? \[\begin{array} { | l | r | } \hline \begin{array} { l } \text { Opening deductible (taxable) temporary } \\ \text { differences } \end{array} & ( 400,000 ) \\ \hline \text { Current year deductible (taxable) temporary } & ( 100,000 ) \\ \text { differences } & \\ \hline \text { Tax rate (prior year) } & 40 \% \\ \hline \text { Tax rate (current year) } & 30 \% \\ \hline \end{array}\]

A) 30,000 debit B) 30,000 credit C) 130,000 credit D) 190,000 credit A) 30,000 debit B) 30,000 credit C) 130,000 credit D) 190,000 credit

What is the balance of the deferred tax liability due to the rate change? $\begin{array}{|l|r|} \hline\text { Opening taxable temporary differences } & 400,000 \\ \hline \text { Tax rate (prior year) } & 25 \% \\ \hline \text { Tax rate (current year) } & 30 \%\\\hline \end{array}$

A) 100,000 debit B) 100,000 credit C) 120,000 debit D) 120,000 credit A) 100,000 debit B) 100,000 credit C) 120,000 debit D) 120,000 credit

What is the income tax payable under the deferral method for F2014? \[\begin{array} { | l | r | r | r | } \hline & \text { F2013 } & \text { F2014 } & \text { F2015 } \\ \hline \text { Income before tax } & 120,000 & 110,000 & 120,000 \\ \hline \text { Taxable income } & 85,000 & 95,000 & 105,000 \\ \hline \text { Tax rate } & 30 \% & 25 \% & 30 \% \\ \hline \end{array}\]

A) $23,750 B) $25,500 C) $27,500 D) $36,000 A) $23,750 B) $25,500 C) $27,500 D) $36,000

How much tax would be reported under the taxes payable method for F2015? \[\begin{array} { | l | r | r | r | } \hline & \text { F2013 } & \text { F2014 } & \text { F2015 } \\ \hline \text { Income before tax } & 120,000 & 110,000 & 120,000 \\ \hline \text { Taxable income } & 85,000 & 95,000 & 105,000 \\ \hline \text { Tax rate } & 30 \% & 25 \% & 30 \% \\ \hline \end{array}\]

A) 25,500 B) 31,500 C) 33,750 D) 36,000 A) 25,500 B) 31,500 C) 33,750 D) 36,000

Exam 16: Accounting for Income Taxes

A company has a deferred tax liability of $20,000 at the beginning of the fiscal year relating to a taxable temporary difference of $80,000.The current year tax rate is 20%. Requirement: Provide the journal entry to reflect the tax rate change.

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Question 1

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The tax rate associated with the deferred tax liability was $20,000 / $80,000 = 25%.Thus,the tax rate declined by 5%. Dr. DIT liability $( \$ 80,000 \times - 5 \% )$ or $( \$ 20,000$ cr $\times ( 20 \% / 25 \% , 1 ) )~~~~~~~~~~~~$ 4,000

$~~~$ Cr. Income tax expense - deferred $~~~~~~~~~~~~~~~$ $~~~~~~~~~~~~~~~$ $~~~~~~~~~~~~~~~$ $~~~~~~~~~~~~~~~$ $~~~~~~~~~~~~~~~$ $~~~~~~~~~~~~~~~$ 4,000

A company earns $490,000 in pre-tax income,while its tax return shows taxable income of $380,000.At a tax rate of 35%,how much is the income tax expense under the taxes payable method permitted under ASPE?

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Question 2

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$\begin{array}{ll}\text { Taxable income } & \$ 380,000 \\\\\text { Tax rate } & \underline{\times \quad 35} \% \\\\\text { Income tax payable; income tax expense } & \underline{\textbf{\$133,000}}\end{array}$

What is a deferred tax asset?

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Question 3

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B

A company has a deferred tax liability of $112,500 at the beginning of the fiscal year relating to a taxable temporary difference of $450,000.The tax rate for the year increased from 25% to 35%. Requirement: Provide the journal entry to reflect the tax rate change.

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Question 4

What is one reason to use the taxes payable method?

(Multiple Choice)

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Question 5

Under the accrual method,what is the effect of the tax rate change in F2014? F2013 F2014 F2015 Deferred tax liability 30,000 Revenue 130,000 150,000 Taxable income 95,000 105,000 Tax rate 30\% 35\% 35\%

(Multiple Choice)

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Question 6

Which statement is correct about the "taxes payable method"?

(Multiple Choice)

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Question 7

A company facing a 45% tax rate has calculated its taxable income for the year to be $2,100,000.It made installment payments during the year totalling $995,000; this amount has been recorded in an asset account as "income tax installments" Requirement: Prepare the journal entry to record the adjusting entry for income taxes at the end of the year under the taxes payable method.

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Question 8

A company earns $390,000 in pre-tax income,while its tax return shows taxable income of $280,000.At a tax rate of 35%,how much is the income tax expense under the taxes payable method permitted under ASPE?

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Question 9

Which statement is accurate?

(Multiple Choice)

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Question 10

The following information relates to the accounting income for Withering Press Company (WPC)for the current year ended December 31. Income before taxes \ 300,000 Dividend income-non taxable 20,000 Depreciation 120,000 CCA 100,000 Impairment (see additional info below) 150,000 Tax rate 40\% The company had purchased land some years ago for $600,000.Recently,it was discovered that this land is contaminated by industrial pollution.Because of the soil remediation costs required,the value of the land has decreased.For tax purposes,the impairment loss is not currently deductible.In the future when the land is sold,half of any losses is deductible against taxable capital gains (ie.,the other half that is not taxable or deductible is a permanent difference). The deferred income tax liability account on January 1 had a credit balance of $45,000.This balance is entirely related to property,plant,and equipment (PPE). Requirement: Prepare the journal entries to record income taxes for WPC.

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Question 11

The following information relates to the accounting income for Saskatchewan Real Estate Company (SREC)for the current year ended December 31. Income before taxes \ 67,000 Depreciation and depletion expense 420,000 CCA 420,000 Gain on disposal of equipment (see additional info below) 220,000 Tax rate 25\% During the year,the company sold one of its buildings with carrying value of $780,000 for proceeds of $1,000,000,resulting in an accounting gain of $220,000.This gain has been included in the pre-tax income figure of $670,000 shown above.For tax purposes,the acquisition cost of the building was $870,000.For purposes of CCA,it is a Class 1 Asset,which treats each building as a separate class.The undepreciated capital cost (VCC)on the building at the time of disposal was $660,000. Requirement: Prepare the journal entries to record income taxes for SREC.

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Question 12

Which statement is not correct?

(Multiple Choice)

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Question 13

What is the tax expense under the deferral method for F2014? F2013 F2014 F2015 Income before tax 120,000 110,000 120,000 Taxable income 85,000 95,000 105,000 Tax rate 30\% 25\% 30\%

(Multiple Choice)

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Question 14

The following summarizes information relating to Gonzalez Corporation's operations for the current year. Sales reventue 5,600,000 Dividend revenue (not taxable) 180,000 Operating expenses other than depreciation (4,000,000) Depreciation Income before tax Capital cost allowance claimed 800,000 Income tax rate 45\% Requirement: Compute the amount of taxes payable and income tax expense for Gonzalez Corporation.

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Question 15

What is the ending balance of deferred taxes? Opening deductible (taxable) temporary differences (400,000) Current year deductible (taxable) temporary (100,000) differences Tax rate (prior year) 40\% Tax rate (current year) 30\%

(Multiple Choice)

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Question 16

What is the balance of the deferred tax liability due to the rate change? Opening taxable temporary differences 400,000 Tax rate (prior year) 25\% Tax rate (current year) 30\%

(Multiple Choice)

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Question 17

A company has a deferred tax liability of $60,000 at the beginning of the fiscal year relating to a taxable temporary difference of $300,000.The tax rate for the year increased from 20% to 25%. Requirement: Provide the journal entry to reflect the tax rate change.

(Essay)

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Question 18

What is the income tax payable under the deferral method for F2014? F2013 F2014 F2015 Income before tax 120,000 110,000 120,000 Taxable income 85,000 95,000 105,000 Tax rate 30\% 25\% 30\%

(Multiple Choice)

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Question 19

How much tax would be reported under the taxes payable method for F2015? F2013 F2014 F2015 Income before tax 120,000 110,000 120,000 Taxable income 85,000 95,000 105,000 Tax rate 30\% 25\% 30\%

(Multiple Choice)

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Question 20

A company has a deferred tax liability of $20,000 at the beginning of the fiscal year relating to a taxable temporary difference of $80,000.The current year tax rate is 20%. Requirement: Provide the journal entry to reflect the tax rate change.

A company earns $490,000 in pre-tax income,while its tax return shows taxable income of $380,000.At a tax rate of 35%,how much is the income tax expense under the taxes payable method permitted under ASPE?

What is a deferred tax asset?

A company has a deferred tax liability of $112,500 at the beginning of the fiscal year relating to a taxable temporary difference of $450,000.The tax rate for the year increased from 25% to 35%. Requirement: Provide the journal entry to reflect the tax rate change.

What is one reason to use the taxes payable method?

Under the accrual method,what is the effect of the tax rate change in F2014? F2013 F2014 F2015 Deferred tax liability 30,000 Revenue 130,000 150,000 Taxable income 95,000 105,000 Tax rate 30\% 35\% 35\%

Which statement is correct about the "taxes payable method"?

A company earns $390,000 in pre-tax income,while its tax return shows taxable income of $280,000.At a tax rate of 35%,how much is the income tax expense under the taxes payable method permitted under ASPE?

Which statement is accurate?

Which statement is not correct?

What is the tax expense under the deferral method for F2014? F2013 F2014 F2015 Income before tax 120,000 110,000 120,000 Taxable income 85,000 95,000 105,000 Tax rate 30\% 25\% 30\%

What is the ending balance of deferred taxes? Opening deductible (taxable) temporary differences (400,000) Current year deductible (taxable) temporary (100,000) differences Tax rate (prior year) 40\% Tax rate (current year) 30\%

What is the balance of the deferred tax liability due to the rate change? Opening taxable temporary differences 400,000 Tax rate (prior year) 25\% Tax rate (current year) 30\%

A company has a deferred tax liability of $60,000 at the beginning of the fiscal year relating to a taxable temporary difference of $300,000.The tax rate for the year increased from 20% to 25%. Requirement: Provide the journal entry to reflect the tax rate change.

What is the income tax payable under the deferral method for F2014? F2013 F2014 F2015 Income before tax 120,000 110,000 120,000 Taxable income 85,000 95,000 105,000 Tax rate 30\% 25\% 30\%

How much tax would be reported under the taxes payable method for F2015? F2013 F2014 F2015 Income before tax 120,000 110,000 120,000 Taxable income 85,000 95,000 105,000 Tax rate 30\% 25\% 30\%

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