Question 1

In general, a temporary difference reflects a difference in the financial accounting basis and tax basis of an asset or liability on the balance sheet.

Accepted Answer

A) True 
 B)False  True

Question 2

Irish Corporation reported pretax book income of $1,000,000. Included in the computation were favorable temporary differences of $300,000, unfavorable temporary differences of $100,000, and favorable permanent differences of $200,000. Compute Irish's book equivalent of taxable income. Use this number to compute the company's total income tax provision or benefit.

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Question 2

Correct Answer:

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BETI of $800,000, total income tax provision of $168,000.
Book equivalent of taxable income takes into account only permanent differences.

Accepted Answer

BETI of $800,000, total income tax provision of $168,000.
   Book equivalent of taxable income takes into account only permanent differences.

Question 3

Angel Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $25,000. In addition, tax depreciation exceeded book depreciation by $100,000. Finally, Angel subtracted a dividends received deduction of $25,000 in computing its current-year taxable income. Angel's hypothetical tax expense in its reconciliation of its income tax expense is:

Accepted Answer

A)  $210,000. 
B)  $204,750. 
C)  $194,250. 
D)  $189,000. 
A)  $210,000. 
B)  $204,750. 
C)  $194,250. 
D)  $189,000. A

Question 4

Lynch Company had a net deferred tax asset of $68,000 at the beginning of the year, representing a net taxable temporary difference of $200,000 (taxed at 34 percent). During the year, Lynch reported pretax book income of $800,000. Included in the computation were favorable temporary differences of $20,000 and unfavorable temporary differences of $50,000. At the beginning of the year, Congress reduced the corporate tax rate to 21 percent. Lynch's deferred income tax expense or benefit for the current year would be:

Accepted Answer

A)  Net deferred tax benefit of $6,300. 
B)  Net deferred tax expense of $6,300. 
C)  Net deferred tax benefit of $32,300. 
D)  Net deferred tax expense of $32,300. 
A)  Net deferred tax benefit of $6,300. 
B)  Net deferred tax expense of $6,300. 
C)  Net deferred tax benefit of $32,300. 
D)  Net deferred tax expense of $32,300.

Question 5

Which of the following statements is true?

Accepted Answer

A)  Another name for a taxable temporary difference is an unfavorable difference. 
B)  Another name for a taxable temporary difference is a favorable difference. 
C)  Another name for a deductible temporary difference is a favorable difference. 
D)  Another name for a deductible temporary difference is a permanent difference. 
A)  Another name for a taxable temporary difference is an unfavorable difference. 
B)  Another name for a taxable temporary difference is a favorable difference. 
C)  Another name for a deductible temporary difference is a favorable difference. 
D)  Another name for a deductible temporary difference is a permanent difference.

Question 6

Yellow Rose Corporation reported pretax book income of $100,000,000. Tax depreciation exceeded book depreciation by $100,000. During the year Yellow Rose capitalized $50,000 into ending inventory under §263A. Capitalized inventory costs of $75,000 in beginning inventory were deducted as part of cost of goods sold on the tax return. Compute Yellow Rose's taxes payable or refundable.

Accepted Answer

$20,973,75

Question 7

Which of the following statements is true?

Accepted Answer

A)  In determining if a valuation allowance is needed, positive evidence is considered more persuasive than negative evidence. 
B)  In determining if a valuation allowance is needed, negative evidence is considered more persuasive than positive evidence. 
C)  In determining if a valuation allowance is needed, negative and positive evidence must be evaluated equally. 
D)  In determining if a valuation allowance is needed, only negative evidence is evaluated. 
A)  In determining if a valuation allowance is needed, positive evidence is considered more persuasive than negative evidence. 
B)  In determining if a valuation allowance is needed, negative evidence is considered more persuasive than positive evidence. 
C)  In determining if a valuation allowance is needed, negative and positive evidence must be evaluated equally. 
D)  In determining if a valuation allowance is needed, only negative evidence is evaluated.

Question 8

Kedzie Company determined that the book basis of its liability for "other postretirement benefits" (OPEB) exceeded the tax basis of this account by $10,000,000. This basis difference is characterized as:

Accepted Answer

A)  Deductible temporary difference. 
B)  Taxable temporary difference. 
C)  Favorable permanent difference. 
D)  Unfavorable permanent difference. 
A)  Deductible temporary difference. 
B)  Taxable temporary difference. 
C)  Favorable permanent difference. 
D)  Unfavorable permanent difference.

Question 9

Identify the following items as creating a temporary difference, permanent difference, or no difference.

Accepted Answer

The answer of Identify the following items as creating a...

Question 10

Gull Corporation reported pretax book income of $2,000,000. Included in the computation were favorable temporary differences of $300,000, unfavorable temporary differences of $200,000, and favorable permanent differences of $50,000. Compute Gull's current income tax expense or benefit.

Accepted Answer

$388,500 c

Question 11

The focus of ASC 740 is on the income statement.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following items is not considered evidence in determining if a valuation allowance is necessary?

Accepted Answer

A)  A cumulative book loss over some period of time. 
B)  Management projects future taxable income based on a backlog of signed contracts. 
C)  A net operating loss expired unused in the current year. 
D)  Management can implement a tax strategy to create future taxable income, but it will be detrimental to the future profitability of the company. 
A)  A cumulative book loss over some period of time. 
B)  Management projects future taxable income based on a backlog of signed contracts. 
C)  A net operating loss expired unused in the current year. 
D)  Management can implement a tax strategy to create future taxable income, but it will be detrimental to the future profitability of the company.

Question 13

Price Corporation reported pretax book income of $600,000. Tax depreciation exceeded book depreciation by $100,000. In addition, the reserve for warranties increased by $40,000. Price had a net deferred tax liability of $34,000 at the beginning of the year, representing a net taxable temporary difference of $100,000. At the beginning of the year, Congress reduced the corporate tax rate from 34 percent to 21 percent. Compute the company's current and deferred income tax expense or benefit.

Accepted Answer

$113,400 current income tax ex

Question 14

Lafayette, Inc., completed its first year of operations with a pretax loss of $800,000. The tax return showed a net operating loss of $750,000. The $50,000 book-tax difference results from a disallowed deduction for business-related meals. Management has determined that they should record a valuation allowance equal to the net deferred tax asset. Prepare the journal entries to record the deferred tax provision and the valuation allowance.

Accepted Answer

The disallowed business-relate

Question 15

A company's effective tax rate can best be described as:

Accepted Answer

A)  The company's cash taxes paid divided by taxable income. 
B)  The company's cash taxes paid divided by net income from continuing operations. 
C)  The company's financial statement income tax provision divided by taxable income. 
D)  The company's financial statement income tax provision divided by net income from continuing operations. 
A)  The company's cash taxes paid divided by taxable income. 
B)  The company's cash taxes paid divided by net income from continuing operations. 
C)  The company's financial statement income tax provision divided by taxable income. 
D)  The company's financial statement income tax provision divided by net income from continuing operations.

Question 16

Which of the following groups does not issue rules that apply to accounting for income taxes?

Accepted Answer

A)  FASB. 
B)  SEC. 
C)  EITF. 
D)  IRS. 
A)  FASB. 
B)  SEC. 
C)  EITF. 
D)  IRS.

Question 17

Moody Corporation recorded the following deferred tax assets and liabilities:
   What will be the balances in the deferred tax asset and deferred tax liability accounts on Moody Corporation's balance sheet?

Accepted Answer

Net deferred tax assets of $800,000 and

Question 18

Which of the following statements best describes a valuation allowance as it relates to accounting for income taxes?

Accepted Answer

A)  A valuation allowance is a contra account to deferred tax assets only. 
B)  A valuation allowance is a contra account to deferred tax liabilities only. 
C)  A valuation allowance is a contra account to deferred tax assets and liabilities. 
D)  A valuation allowance is a contra account to noncurrent deferred tax assets only. 
A)  A valuation allowance is a contra account to deferred tax assets only. 
B)  A valuation allowance is a contra account to deferred tax liabilities only. 
C)  A valuation allowance is a contra account to deferred tax assets and liabilities. 
D)  A valuation allowance is a contra account to noncurrent deferred tax assets only.

Question 19

Heron Corporation reported pretax book income of $4,000,000. Included in the computation were favorable temporary differences of $500,000, unfavorable temporary differences of $700,000, and unfavorable permanent differences of $200,000. Compute Heron's current income tax expense or benefit.

Accepted Answer

$924,000 c

Question 20

Which of the following temporary differences creates a deferred tax liability?

Accepted Answer

A)  Accumulated tax depreciation in excess of book depreciation on a building. 
B)  Accumulated tax amortization in excess of book amortization on a customer list. 
C)  Compensation expensed for book purposes but deferred for tax purposes. 
D)  Both accumulated tax depreciation in excess of book depreciation on a building and accumulated tax amortization in excess of book amortization on a customer list create a deferred tax liability. 
A)  Accumulated tax depreciation in excess of book depreciation on a building. 
B)  Accumulated tax amortization in excess of book amortization on a customer list. 
C)  Compensation expensed for book purposes but deferred for tax purposes. 
D)  Both accumulated tax depreciation in excess of book depreciation on a building and accumulated tax amortization in excess of book amortization on a customer list create a deferred tax liability.

In general, a temporary difference reflects a difference in the financial accounting basis and tax basis of an asset or liability on the balance sheet.

Which of the following statements is true?

Which of the following statements is true?

Kedzie Company determined that the book basis of its liability for "other postretirement benefits" (OPEB) exceeded the tax basis of this account by $10,000,000. This basis difference is characterized as:

Identify the following items as creating a temporary difference, permanent difference, or no difference.

Gull Corporation reported pretax book income of $2,000,000. Included in the computation were favorable temporary differences of $300,000, unfavorable temporary differences of $200,000, and favorable permanent differences of $50,000. Compute Gull's current income tax expense or benefit.

The focus of ASC 740 is on the income statement.

Which of the following items is not considered evidence in determining if a valuation allowance is necessary?

A company's effective tax rate can best be described as:

Which of the following groups does not issue rules that apply to accounting for income taxes?

Moody Corporation recorded the following deferred tax assets and liabilities: What will be the balances in the deferred tax asset and deferred tax liability accounts on Moody Corporation's balance sheet?

Which of the following statements best describes a valuation allowance as it relates to accounting for income taxes?

Heron Corporation reported pretax book income of $4,000,000. Included in the computation were favorable temporary differences of $500,000, unfavorable temporary differences of $700,000, and unfavorable permanent differences of $200,000. Compute Heron's current income tax expense or benefit.

Which of the following temporary differences creates a deferred tax liability?

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Operations

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

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Exam 6: Accounting for Income Taxes

In general, a temporary difference reflects a difference in the financial accounting basis and tax basis of an asset or liability on the balance sheet.

Which of the following statements is true?

Which of the following statements is true?

Kedzie Company determined that the book basis of its liability for "other postretirement benefits" (OPEB) exceeded the tax basis of this account by $10,000,000. This basis difference is characterized as:

Identify the following items as creating a temporary difference, permanent difference, or no difference.

Gull Corporation reported pretax book income of $2,000,000. Included in the computation were favorable temporary differences of $300,000, unfavorable temporary differences of $200,000, and favorable permanent differences of $50,000. Compute Gull's current income tax expense or benefit.

The focus of ASC 740 is on the income statement.

Which of the following items is not considered evidence in determining if a valuation allowance is necessary?

A company's effective tax rate can best be described as:

Which of the following groups does not issue rules that apply to accounting for income taxes?

Moody Corporation recorded the following deferred tax assets and liabilities: What will be the balances in the deferred tax asset and deferred tax liability accounts on Moody Corporation's balance sheet?

Which of the following statements best describes a valuation allowance as it relates to accounting for income taxes?

Heron Corporation reported pretax book income of $4,000,000. Included in the computation were favorable temporary differences of $500,000, unfavorable temporary differences of $700,000, and unfavorable permanent differences of $200,000. Compute Heron's current income tax expense or benefit.

Which of the following temporary differences creates a deferred tax liability?

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Entities Overview

Corporate Operations

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

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