Exam 16: Income Taxes

The following information is taken from Blackhawk Corporation's 2011 financial records: Assume the taxable temporary difference was created entirely in 2011 and will reverse in equal net taxable amounts in each of the next three years. If tax rates are 40 percent in 2011, 35 percent in 2012, 35 percent in 2013, and 30 percent in 2014, then the total deferred tax liability Blackhawk should report on its December 31, 2011, balance sheet is

Which of the following temporary differences ordinarily creates a deferred tax asset?

Which of the following items results in a temporary difference deductible amount for a given year?

Analysis of the assets and liabilities of Marie Corp. on December 31, 2011, disclosed assets with a tax basis of $1,000,000 and a book basis of $1,300,000. There was no difference in the liability basis. The difference in asset basis arose from temporary differences that would reverse in the following years: The enacted tax rates are 30 percent for the years 2011-2014 and 35 percent for 2015-2018. The total deferred tax liability on December 31, 2011, should be

Which of the following creates a permanent difference between financial income and taxable income?

SFAS No 109 takes a decidedly different approach to the treatment of operating loss carryforwards. Under APB Opinion No. 11, the presumption was that operating losses would not be realizable. As a result, the entity experiencing the loss would not provide for the effects of carryforwards in its financial statements until the benefits were in fact later realized for tax purposes. SFAS No. 96 was even more stringent in its approach in that net deferred tax debits were prohibited to the extent they exceeded amounts which would be recoverable through operating loss carrybacks as of the date of the balance sheet. SFAS No. 109 treats net operating loss carryforwards in the same manner as the tax effects of other deductible temporary differences and allow both to be recognized as deferred tax assets. The approach of SFAS No. 109 has been criticized by some, however. Required: Identify what you perceive to be the weaknesses in the approach promulgated by SFAS No. 109.

Garrison Designs, Inc., a corporation organized on January 1, 2002, reported the following incomes (losses) for the ten-year period, 2002-2011: Applying the carryback provisions in the tax law, compute the net amount of taxes paid (amounts paid less refunds) for the ten-year period ending December 31, 2011

Which of the following items results in a temporary difference taxable amount for a given year?

Cowboy Corporation reported depreciation of $450,000 on its 2011 tax return. However, in its 2011 income statement, Cowboy reported depreciation of $300,000,as well as $30,000 interest revenue on tax-free bonds. The difference in depreciation is only a temporary difference, and it will reverse equally over the next three years. Cowboy's enacted income tax rates are as follows: What amount should be included in the deferred income tax liability in Cowboy's December 31, 2011, balance sheet?

The Indy Company had taxable income of $12,000 during 2011. Indy used accelerated depreciation for tax purposes ($3,400) and straight-line depreciation for accounting purposes ($2,000). Assuming Indy had no other temporary differences, what would the company's pretax accounting income be for 2011?

The purpose of an interperiod income tax allocation is to

On the statement of cash flows using the indirect method, an increase in the deferred tax liability would be shown as

Intraperiod tax allocation

Which of the following is not a source of support for the realization of a deferred tax asset?

In 2011, Eric Corporation reported $90,000 net income before income taxes. The income tax rate for 2011 was 30 percent. Eric had an unused $60,000 net operating loss carryforward arising in 2010 when the tax rate was 35 percent. The income tax expense Eric would report for 2011 would be

Which of the following is an example of a temporary difference that would result in a deferred tax liability?

Gamma had pretax accounting income of $1,400 during 2011. Gamma used accelerated depreciation for tax purposes ($1,000) and straight-line depreciation for financial reporting purposes ($200). During 2011, Gamma accrued warranty expenses of $900 and paid cash to honor warranties of $500. Gamma's taxable income for 2011 would be

IAS No. 12, "Income Taxes," contains the provisions relating to accounting for income taxes. The international standard is similar to U.S. GAAP in that it uses the asset and liability approach for recording deferred income taxes. There are some differences between IASB standards and U.S. GAAP relating to the asset-liability approach, recognition, measurement, disclosure criteria, and implementation, however. Required: Identify and discuss the differences between U.S. GAAP and IAS No. 12 and other international standards.

Viking Corporation reported depreciation of $250,000 on its 2011 tax return. However, in its 2011 income statement, Viking reported depreciation of $100,000. The difference in depreciation is a temporary difference that will reverse over time. Assuming Viking's tax rate is constant at 30 percent, what amount should be added to the deferred income tax liability in Viking's December 31, 2011, balance sheet?

Historically, the United Kingdom has recognized only those deferred tax liabilities expected to "crystallize." The term "crystallize" is most nearly synonymous with the term