Question 1

Which method does not use "temporary differences" to account for income tax expense?

Accepted Answer

A) The taxes payable method. 
B) The deferral method. 
C) The accrual method. 
D) The tax allocation method. 
A) The taxes payable method. 
B) The deferral method. 
C) The accrual method. 
D) The tax allocation method.

Question 2

What adjustment is required to the opening deferred taxes as a result of the rate change? $$\begin{array} { | l | r | } 
\hline \begin{array} { l } 
\text { Opening deductible (taxable) temporary } \
\text { differences }
\end{array} & ( 400,000 ) \
\hline \text { Current year deductible (taxable) temporary } & ( 100,000 ) \
\text { differences } & \
\hline \text { Tax rate (prior year) } & 40 \% \
\hline \text { Tax rate (current year) } & 30 \% \
\hline
\end{array}$$

Accepted Answer

A) 30,000 debit 
B) 90,000 debit 
C) 120,000 debit 
D) 150,000 debit 
A) 30,000 debit 
B) 90,000 debit 
C) 120,000 debit 
D) 150,000 debit

Question 3

What is a "taxable" temporary difference?

Accepted Answer

A) Results in future taxable income being higher than accounting income. 
B) Results in future taxable income being less than accounting income. 
C) The amount of income tax payable in the current and future periods. 
D) Result of an event affecting accounting and taxable income in different periods. 
A) Results in future taxable income being higher than accounting income. 
B) Results in future taxable income being less than accounting income. 
C) The amount of income tax payable in the current and future periods. 
D) Result of an event affecting accounting and taxable income in different periods.

Question 4

A company has a deferred tax liability of $120,000 at the beginning of the fiscal year relating to a taxable temporary difference of $300,000.The current year tax rate is 50%.
Requirement:
Provide the journal entry to reflect the tax rate change.

Accepted Answer

The tax rate associated with t

Question 5

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

Accepted Answer

A) $10,500 
B) $25,500 
C) $30,750 
D) $36,000 
A) $10,500 
B) $25,500 
C) $30,750 
D) $36,000

Question 6

Which statement is correct?

Accepted Answer

A) Income tax system treats income and losses symmetrically. 
B) Income tax system treats income and losses asymmetrically. 
C) When a company has a loss,a refund is received equal to the loss multiplied by the tax rate. 
D) A loss carryforward has immediate cash flow benefits to a company. 
A) Income tax system treats income and losses symmetrically. 
B) Income tax system treats income and losses asymmetrically. 
C) When a company has a loss,a refund is received equal to the loss multiplied by the tax rate. 
D) A loss carryforward has immediate cash flow benefits to a company.

Question 7

How much tax expense would be recorded under the accrual method for F2014? $$\begin{array} { | l | r | r | r | } 
\hline & \text { F2013 } & \text { F2014 } & \text { F2015 } \
\hline \text { Deferred tax liability } & 30,000 & & \
\hline \text { Revenue } & & 130,000 & 150,000 \
\hline \text { Taxable income } & & 95,000 & 105,000 \
\hline \text { Tax rate } & 30 \% & 25 \% & 35 \% \
\hline
\end{array}$$

Accepted Answer

A) 5,000 
B) 27,500 
C) 32,500 
D) 37,500 
A) 5,000 
B) 27,500 
C) 32,500 
D) 37,500

Question 8

A company has income before tax of $350,000,which includes a permanent difference of $65,000 relating to non-taxable dividend income.There are no other permanent or temporary differences.The income tax rate is 45%.
Requirement:
Compute the amount of taxes payable and income tax expense.

Accepted Answer

None

Question 9

A company had taxable income of $2 million in fiscal 2013 and paid taxes of 0.6 million; the company incurred a loss of $7 million in fiscal 2015 when the tax rate is 50%.How much refund is the company entitled to?

Accepted Answer

A) Nil 
B) $0.6 million 
C) $1.0 million 
D) $3.5 million 
A) Nil 
B) $0.6 million 
C) $1.0 million 
D) $3.5 million

Question 10

What is an "originating difference"?

Accepted Answer

A) The net carrying amount of a capital asset or capital asset class for tax purposes in Canada. 
B) A temporary item that narrows that gap between accounting and tax values of an asset or liability. 
C) A temporary item that widens the gap between accounting and tax values of an asset or liability. 
D) The terminology used for depreciation of capital assets under for tax purposes in Canada. 
A) The net carrying amount of a capital asset or capital asset class for tax purposes in Canada. 
B) A temporary item that narrows that gap between accounting and tax values of an asset or liability. 
C) A temporary item that widens the gap between accounting and tax values of an asset or liability. 
D) The terminology used for depreciation of capital assets under for tax purposes in Canada.

Question 11

For each of the following differences between the amount of taxable income and income recorded for financial reporting purposes,compute the effect of each difference on deferred taxes balances on the balance sheet.Treat each item independently of the others.Assume a tax rate of 30%.

Accepted Answer

The answer of For each of the following differences between...

Question 12

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 30%.
Requirement:
Provide the journal entry to reflect the tax rate change.

Accepted Answer

The tax rate associated with t

Question 13

Under the accrual method,what is the effect of the current year temporary difference in F2014? $$\begin{array} { | l | r | r | r | } 
\hline & \text { F2013 } & \text { F2014 } & \text { F2015 } \
\hline \text { Deferred tax liability } & 27,000 & & \
\hline \text { Revenue } & & 100,000 & 150,000 \
\hline \text { Taxable income } & & 95,000 & 105,000 \
\hline \text { Tax rate } & 30 \% & 35 \% & 35 \% \
\hline
\end{array}$$

Accepted Answer

A) 4,500 
B) 30,500 
C) 35,000 
D) 39,500 
A) 4,500 
B) 30,500 
C) 35,000 
D) 39,500

Question 14

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

Accepted Answer

A) 5,000 
B) 27,500 
C) 32,500 
D) 37,500 
A) 5,000 
B) 27,500 
C) 32,500 
D) 37,500

Question 15

The following information relates to the accounting income for Ontario Uranium Enterprises (QUE)for the current year ended December 31.
 $\begin{array}{ll}
\text { Income before taxes } & \$ 850,000 \\
\text { Membership fees }- \text { non deductible for tax } & 20,000 \\
\text { Depreciation and depletion expense } & 380,000 \\
\text { CCA } & 470,000 \\
\text { Loss on disposal of equipment (see additional info below) } & 75,000 \\
\text { Tax rate } & 30 \%
\end{array}$ During the year,the company sold one of its machines with carrying value of $85,000 for proceeds of $10,000,resulting in an accounting loss of $75,000.This loss has been included in the pre-tax income figure of $850,000 shown above.For tax purposes,the proceeds from the disposal were removed from the undepreciated capital cost (VCC)of Class 8 assets.
The deferred income tax liability account on January 1 had a credit balance of $230,000.This balance is entirely related to property,plant,and equipment (PPE).
Requirement:
Prepare the journal entries to record income taxes for QUE.

Accepted Answer

@#IMG-DLM& *The accounting loss is not currently d

Question 16

A company had taxable income of $2 million in fiscal 2013 and paid taxes of 7.7 million; the company incurred a loss of $8 million in fiscal 2015 when the tax rate is 50%.How much refund is the company entitled to?

Accepted Answer

A) Nil 
B) $0.7 million 
C) $3.85 million 
D) $4 million 
A) Nil 
B) $0.7 million 
C) $3.85 million 
D) $4 million

Question 17

For the year ended October 31,2009,NB Financial Group (National Bank)reported income before tax of $2,160 million and income tax expense of $274 million,for an effective tax rate of 12.7% ($274m / $2,160m).In the notes to the financial statements,NB's disclosures included the following information:
 \[\begin{array} { | l | r | r | } 
\hline \textbf { Reconciliation of statutory and effective rates } & \begin{array} { l } 
\textbf { Amount } \
( \textbf {\$ millions) }
\end{array} & { \begin{array} { c } 
\textbf { Rate } \
\textbf{(\%)}
\end{array} } \
\hline \text { Combined Canadian federal and provincial income } & & \
\text { tax rates at the statutory rate } & 734 & 34 \
\hline \text { Increase (decrease) resulting from: } & & \
\hline \text { Tax exempt income } & ( 180 ) & ( 8.3 ) \
\hline \text { Foreign operations subject to different tax rates } & ( 210 )& ( 9.7 ) \
\hline \text { Change in tax rate for deferred income taxes } & 14 & 0.6 \
\hline \text { Intangible assets not deductible for tax purposes } & 8 & 0.4 \
\hline \text { Recovery of prior year's income taxes } & ( 80 ) & ( 3.7 ) \
\hline \text { Other } & ( 12 ) & ( 0.6 ) \
\hline \text { Income tax expense and efective tax rate } & 274 & 12.7 \
\hline \text { Dollars amounts in millions) } & 2009 & 2008 \
\hline \text { Deferred income tax assets } & \$ 1,080 & 1,205 \
\hline \text { Deferred income tax liabilities } & 750 & 700 \
\hline
\end{array}\] Requirements:
a.From NB's disclosures provided above,identify any permanent differences.
b.In which direction did the tax rate change from 2008 to 2009?
c.Refer to the line "Recovery of prior years' income taxes" in the above disclosures.What does this information imply about NB's treatment of tax losses in prior years?

Accepted Answer

a.Permanent differences: @#IMG-DLM& b.NB had defer

Question 18

Which statement is correct?

Accepted Answer

A) The deferral and accrual methods produce the same tax expense when tax rates are constant. 
B) The deferral method applies new tax rates to accumulated tax balances. 
C) The accrual method applies new tax rates to only to current year's income. 
D) The deferral and accrual methods produce the same tax expense when tax rates are falling. 
A) The deferral and accrual methods produce the same tax expense when tax rates are constant. 
B) The deferral method applies new tax rates to accumulated tax balances. 
C) The accrual method applies new tax rates to only to current year's income. 
D) The deferral and accrual methods produce the same tax expense when tax rates are falling.

Question 19

Which statement is not correct?

Accepted Answer

A) Loss carryback result in definite cash inflow. 
B) Loss carryback result in immediate cash inflow. 
C) Loss carryforward result in definite cash inflow. 
D) Loss carryforward result in uncertain cash inflow. 
A) Loss carryback result in definite cash inflow. 
B) Loss carryback result in immediate cash inflow. 
C) Loss carryforward result in definite cash inflow. 
D) Loss carryforward result in uncertain cash inflow.

Question 20

What is the income tax payable under the deferral method for F2015? $$\begin{array} { | l | r | r | r | } 
\hline & \text { F2013 } & \text { F2014 } & \text { F2015 } \
\hline \text { Income before tax } & 120,000 & 110,000 & 150,000 \
\hline \text { Taxable income } & 85,000 & 95,000 & 105,000 \
\hline \text { Tax rate } & 30 \% & 25 \% & 35 \% \
\hline
\end{array}$$

Accepted Answer

A) $27,500 
B) $36,000 
C) $36,750 
D) $52,500 
A) $27,500 
B) $36,000 
C) $36,750 
D) $52,500

Which method does not use "temporary differences" to account for income tax expense?

What adjustment is required to the opening deferred taxes as a result of the rate change? 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 a "taxable" temporary difference?

A company has a deferred tax liability of $120,000 at the beginning of the fiscal year relating to a taxable temporary difference of $300,000.The current year tax rate is 50%. Requirement: Provide the journal entry to reflect the tax rate change.

What is the deferred tax liability under the deferral method for F2013? 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\%

Which statement is correct?

How much tax expense would be recorded under the accrual method for F2014? F2013 F2014 F2015 Deferred tax liability 30,000 Revenue 130,000 150,000 Taxable income 95,000 105,000 Tax rate 30\% 25\% 35\%

A company has income before tax of $350,000,which includes a permanent difference of $65,000 relating to non-taxable dividend income.There are no other permanent or temporary differences.The income tax rate is 45%. Requirement: Compute the amount of taxes payable and income tax expense.

A company had taxable income of $2 million in fiscal 2013 and paid taxes of 0.6 million; the company incurred a loss of $7 million in fiscal 2015 when the tax rate is 50%.How much refund is the company entitled to?

What is an "originating difference"?

For each of the following differences between the amount of taxable income and income recorded for financial reporting purposes,compute the effect of each difference on deferred taxes balances on the balance sheet.Treat each item independently of the others.Assume a tax rate of 30%.

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 30%. Requirement: Provide the journal entry to reflect the tax rate change.

Under the accrual method,what is the effect of the current year temporary difference in F2014? F2013 F2014 F2015 Deferred tax liability 27,000 Revenue 100,000 150,000 Taxable income 95,000 105,000 Tax rate 30\% 35\% 35\%

Under the accrual method,what is the effect of the current year temporary difference 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\%

A company had taxable income of $2 million in fiscal 2013 and paid taxes of 7.7 million; the company incurred a loss of $8 million in fiscal 2015 when the tax rate is 50%.How much refund is the company entitled to?

Which statement is correct?

Which statement is not correct?

What is the income tax payable under the deferral method for F2015? F2013 F2014 F2015 Income before tax 120,000 110,000 150,000 Taxable income 85,000 95,000 105,000 Tax rate 30\% 25\% 35\%

Current Liabilities and Contingencies

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Pensions and Other Employee Future Benefits

Accounting for Leases

Statement of Cash Flows

Filters

Exam 16: Accounting for Income Taxes

Which method does not use "temporary differences" to account for income tax expense?

What adjustment is required to the opening deferred taxes as a result of the rate change? 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 a "taxable" temporary difference?

A company has a deferred tax liability of $120,000 at the beginning of the fiscal year relating to a taxable temporary difference of $300,000.The current year tax rate is 50%. Requirement: Provide the journal entry to reflect the tax rate change.

What is the deferred tax liability under the deferral method for F2013? 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\%

Which statement is correct?

How much tax expense would be recorded under the accrual method for F2014? F2013 F2014 F2015 Deferred tax liability 30,000 Revenue 130,000 150,000 Taxable income 95,000 105,000 Tax rate 30\% 25\% 35\%

A company has income before tax of $350,000,which includes a permanent difference of $65,000 relating to non-taxable dividend income.There are no other permanent or temporary differences.The income tax rate is 45%. Requirement: Compute the amount of taxes payable and income tax expense.

A company had taxable income of $2 million in fiscal 2013 and paid taxes of 0.6 million; the company incurred a loss of $7 million in fiscal 2015 when the tax rate is 50%.How much refund is the company entitled to?

What is an "originating difference"?

For each of the following differences between the amount of taxable income and income recorded for financial reporting purposes,compute the effect of each difference on deferred taxes balances on the balance sheet.Treat each item independently of the others.Assume a tax rate of 30%.

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 30%. Requirement: Provide the journal entry to reflect the tax rate change.

Under the accrual method,what is the effect of the current year temporary difference in F2014? F2013 F2014 F2015 Deferred tax liability 27,000 Revenue 100,000 150,000 Taxable income 95,000 105,000 Tax rate 30\% 35\% 35\%

Under the accrual method,what is the effect of the current year temporary difference 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\%

A company had taxable income of $2 million in fiscal 2013 and paid taxes of 7.7 million; the company incurred a loss of $8 million in fiscal 2015 when the tax rate is 50%.How much refund is the company entitled to?

Which statement is correct?

Which statement is not correct?

What is the income tax payable under the deferral method for F2015? F2013 F2014 F2015 Income before tax 120,000 110,000 150,000 Taxable income 85,000 95,000 105,000 Tax rate 30\% 25\% 35\%

Current Liabilities and Contingencies

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Pensions and Other Employee Future Benefits

Accounting for Leases

Statement of Cash Flows

Filters