Question 1

ASC 740 permits a corporation to net its deferred tax assets and deferred tax liabilities regardless of the jurisdiction in which they arise.

Accepted Answer

A) True 
 B)False

Question 2

B-Line Company reported pretax net income from continuing operations of $1,000,000 and taxable income of $800,000. The favorable book-tax difference of $200,000 was due to a $100,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $50,000 due to accrued vacation pay, and a $150,000 favorable permanent difference from the dividends received deduction.
a. Compute B-Line's current income tax expense.
b. Compute B-Line's deferred income tax expense or benefit.
c. Compute B-Line's effective tax rate.
d. Provide a reconciliation of B-Line's effective tax rate with its hypothetical tax rate of 21 percent.

Accepted Answer

@#IMG-DLM& @#IMG-DLM& Total income tax provision =

Question 3

Tuna Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $25,000. In addition, book depreciation exceeded tax depreciation by $100,000. Finally, Tuna subtracted a dividends received deduction of $15,000 in computing its current-year taxable income. Book equivalent of taxable income is:

Accepted Answer

A)  $1,125,000. 
B)  $1,110,000. 
C)  $1,015,000. 
D)  $985,000. 
A)  $1,125,000. 
B)  $1,110,000. 
C)  $1,015,000. 
D)  $985,000.

Question 4

Frost Corporation reported pretax book income of $3,000,000. Included in the computation were favorable temporary differences of $200,000, unfavorable temporary differences of $350,000, and unfavorable permanent differences of $50,000. Compute Frost's deferred income tax expense or benefit.

Accepted Answer

$31,500 deferred income tax be

Question 5

ASC 740 applies a two-step process in determining if an uncertain tax benefit should be recognized.

Accepted Answer

A) True 
 B)False

Question 6

ASC 740 deals with accounting for uncertain tax positions.

Accepted Answer

A) True 
 B)False

Question 7

MAC, Inc., completed its first year of operations with a pretax loss of $300,000. The tax return showed a net operating loss of $500,000. The $200,000 book-tax difference results from excess tax depreciation over book depreciation. 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 deferred tax liability rel

Question 8

Milton Corporation reported pretax book income of $2,500,000. Included in the computation were favorable temporary differences of $400,000, unfavorable temporary differences of $150,000, and favorable permanent differences of $100,000. Compute Milton's deferred income tax expense or benefit.

Accepted Answer

$52,500 deferred income tax ex

Question 9

Which of the following statements concerning the classification of deferred tax assets and liabilities is true?

Accepted Answer

A)  A deferred tax asset is classified as noncurrent only if the company expects the future tax benefit to be received more than 12 months from the balance sheet date. 
B)  All deferred tax assets and liabilities are treated as noncurrent. 
C)  A deferred tax asset related to a bad debt reserve is classified as current if the related accounts receivable is classified as a current asset. 
D)  A deferred tax asset related to inventory capitalization is classified as noncurrent only if the company uses a FIFO accounting method and the inventory to which the deferred tax asset relates will not be treated as sold within 12 months from the balance sheet date. 
A)  A deferred tax asset is classified as noncurrent only if the company expects the future tax benefit to be received more than 12 months from the balance sheet date. 
B)  All deferred tax assets and liabilities are treated as noncurrent. 
C)  A deferred tax asset related to a bad debt reserve is classified as current if the related accounts receivable is classified as a current asset. 
D)  A deferred tax asset related to inventory capitalization is classified as noncurrent only if the company uses a FIFO accounting method and the inventory to which the deferred tax asset relates will not be treated as sold within 12 months from the balance sheet date.

Question 10

Davison Company determined that the book basis of its net accounts receivable was less than the tax basis of its net accounts receivable by $800,000 due to a difference in the allowance for bad debts account. 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 11

Marlin Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $25,000. In addition, book depreciation exceeded tax depreciation by $100,000. Finally, Marlin subtracted a dividends received deduction of $15,000 in computing its current-year taxable income. Marlin's current income tax expense or benefit would be:

Accepted Answer

A)  $236,250 tax expense. 
B)  $233,100 tax expense. 
C)  $210,000 tax expense. 
D)  $205,800 tax expense. 
A)  $236,250 tax expense. 
B)  $233,100 tax expense. 
C)  $210,000 tax expense. 
D)  $205,800 tax expense.

Question 12

Which of the following statements about uncertain tax position disclosures is false?

Accepted Answer

A)  ASC 740 requires a company to disclose the amount of unrecognized tax benefits for each country in which it files a tax return. 
B)  ASC 740 requires a company to disclose the aggregate amount of unrecognized tax benefits, separated between U.S., state and local, and international tax positions. 
C)  ASC 740 requires a company to disclose the aggregate amount of unrecognized tax benefits without separation between U.S., state and local, and international tax positions. 
D)  None of the choices are correct. 
A)  ASC 740 requires a company to disclose the amount of unrecognized tax benefits for each country in which it files a tax return. 
B)  ASC 740 requires a company to disclose the aggregate amount of unrecognized tax benefits, separated between U.S., state and local, and international tax positions. 
C)  ASC 740 requires a company to disclose the aggregate amount of unrecognized tax benefits without separation between U.S., state and local, and international tax positions. 
D)  None of the choices are correct.

Question 13

Which of the following statements best describes the ASC 740 rules related to the disclosure of the components of deferred tax assets and liabilities in the company's income tax note?

Accepted Answer

A)  A publicly traded company should disclose the approximate "tax effect" (dollar amounts) of all of the components of its deferred tax assets and liabilities in a footnote to the financial statements. 
B)  A publicly traded company should disclose the approximate "tax effect" (dollar amounts) of only those components of its deferred tax assets and liabilities that give rise to a "significant" portion of net deferred tax liabilities and deferred tax assets in a footnote to the financial statements. 
C)  A privately held company should disclose the approximate "tax effect" (dollar amounts) of all of the components of its deferred tax assets and liabilities in a footnote to the financial statements. 
D)  A privately held company should disclose the approximate "tax effect" (dollar amounts) of only those components of its deferred tax assets and liabilities that give rise to a "significant" portion of net deferred tax liabilities and deferred tax assets in a footnote to the financial statements. 
A)  A publicly traded company should disclose the approximate "tax effect" (dollar amounts) of all of the components of its deferred tax assets and liabilities in a footnote to the financial statements. 
B)  A publicly traded company should disclose the approximate "tax effect" (dollar amounts) of only those components of its deferred tax assets and liabilities that give rise to a "significant" portion of net deferred tax liabilities and deferred tax assets in a footnote to the financial statements. 
C)  A privately held company should disclose the approximate "tax effect" (dollar amounts) of all of the components of its deferred tax assets and liabilities in a footnote to the financial statements. 
D)  A privately held company should disclose the approximate "tax effect" (dollar amounts) of only those components of its deferred tax assets and liabilities that give rise to a "significant" portion of net deferred tax liabilities and deferred tax assets in a footnote to the financial statements.

Question 14

Which of the following items would likely not be included in the computation of a company's structural effective tax rate?

Accepted Answer

A)  Tax effects of international operations. 
B)  Tax effects of state and local operations. 
C)  Tax effects from the R&D credit. 
D)  Tax effects from goodwill impairment. 
A)  Tax effects of international operations. 
B)  Tax effects of state and local operations. 
C)  Tax effects from the R&D credit. 
D)  Tax effects from goodwill impairment.

Question 15

Smith Company reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000, unfavorable temporary differences of $20,000, and favorable permanent differences of $40,000. Smith's deferred income tax expense or benefit would be:

Accepted Answer

A)  Net deferred tax expense of $6,300. 
B)  Net deferred tax benefit of $6,300. 
C)  Net deferred tax expense of $14,700. 
D)  Net deferred tax benefit of $14,700. 
A)  Net deferred tax expense of $6,300. 
B)  Net deferred tax benefit of $6,300. 
C)  Net deferred tax expense of $14,700. 
D)  Net deferred tax benefit of $14,700.

Question 16

Tax-exempt interest from municipal bonds is an example of a permanent book-tax difference.

Accepted Answer

A) True 
 B)False

Question 17

A valuation allowance can reduce both a deferred tax asset and a deferred tax liability.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following temporary differences creates a deferred tax asset in the year in which it originates?

Accepted Answer

A)  Accelerated tax depreciation in excess of straight-line book depreciation. 
B)  Prepayment income reported as income on the tax return prior to being reported as income on the financial income statement. 
C)  Gain reported on the income statement prior to being reported on the tax return. 
D)  Prepayment deduction reported on the tax return prior to being reported on the income statement. 
A)  Accelerated tax depreciation in excess of straight-line book depreciation. 
B)  Prepayment income reported as income on the tax return prior to being reported as income on the financial income statement. 
C)  Gain reported on the income statement prior to being reported on the tax return. 
D)  Prepayment deduction reported on the tax return prior to being reported on the income statement.

Question 19

Temporary differences that are cumulatively "favorable" are referred to as taxable temporary differences.

Accepted Answer

A) True 
 B)False

Question 20

ASC 740 requires a publicly traded company to disclose the components of its deferred tax assets and liabilities only if the amounts are considered to be:

Accepted Answer

A)  Material. 
B)  Significant. 
C)  Pertinent. 
D)  Important. 
A)  Material. 
B)  Significant. 
C)  Pertinent. 
D)  Important.

ASC 740 permits a corporation to net its deferred tax assets and deferred tax liabilities regardless of the jurisdiction in which they arise.

Frost Corporation reported pretax book income of $3,000,000. Included in the computation were favorable temporary differences of $200,000, unfavorable temporary differences of $350,000, and unfavorable permanent differences of $50,000. Compute Frost's deferred income tax expense or benefit.

ASC 740 applies a two-step process in determining if an uncertain tax benefit should be recognized.

ASC 740 deals with accounting for uncertain tax positions.

Milton Corporation reported pretax book income of $2,500,000. Included in the computation were favorable temporary differences of $400,000, unfavorable temporary differences of $150,000, and favorable permanent differences of $100,000. Compute Milton's deferred income tax expense or benefit.

Which of the following statements concerning the classification of deferred tax assets and liabilities is true?

Davison Company determined that the book basis of its net accounts receivable was less than the tax basis of its net accounts receivable by $800,000 due to a difference in the allowance for bad debts account. This basis difference is characterized as:

Which of the following statements about uncertain tax position disclosures is false?

Which of the following statements best describes the ASC 740 rules related to the disclosure of the components of deferred tax assets and liabilities in the company's income tax note?

Which of the following items would likely not be included in the computation of a company's structural effective tax rate?

Smith Company reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000, unfavorable temporary differences of $20,000, and favorable permanent differences of $40,000. Smith's deferred income tax expense or benefit would be:

Tax-exempt interest from municipal bonds is an example of a permanent book-tax difference.

A valuation allowance can reduce both a deferred tax asset and a deferred tax liability.

Which of the following temporary differences creates a deferred tax asset in the year in which it originates?

Temporary differences that are cumulatively "favorable" are referred to as taxable temporary differences.

ASC 740 requires a publicly traded company to disclose the components of its deferred tax assets and liabilities only if the amounts are considered to be:

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

Filters

Exam 6: Accounting for Income Taxes

ASC 740 permits a corporation to net its deferred tax assets and deferred tax liabilities regardless of the jurisdiction in which they arise.

Frost Corporation reported pretax book income of $3,000,000. Included in the computation were favorable temporary differences of $200,000, unfavorable temporary differences of $350,000, and unfavorable permanent differences of $50,000. Compute Frost's deferred income tax expense or benefit.

ASC 740 applies a two-step process in determining if an uncertain tax benefit should be recognized.

ASC 740 deals with accounting for uncertain tax positions.

Milton Corporation reported pretax book income of $2,500,000. Included in the computation were favorable temporary differences of $400,000, unfavorable temporary differences of $150,000, and favorable permanent differences of $100,000. Compute Milton's deferred income tax expense or benefit.

Which of the following statements concerning the classification of deferred tax assets and liabilities is true?

Davison Company determined that the book basis of its net accounts receivable was less than the tax basis of its net accounts receivable by $800,000 due to a difference in the allowance for bad debts account. This basis difference is characterized as:

Which of the following statements about uncertain tax position disclosures is false?

Which of the following statements best describes the ASC 740 rules related to the disclosure of the components of deferred tax assets and liabilities in the company's income tax note?

Which of the following items would likely not be included in the computation of a company's structural effective tax rate?

Smith Company reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000, unfavorable temporary differences of $20,000, and favorable permanent differences of $40,000. Smith's deferred income tax expense or benefit would be:

Tax-exempt interest from municipal bonds is an example of a permanent book-tax difference.

A valuation allowance can reduce both a deferred tax asset and a deferred tax liability.

Which of the following temporary differences creates a deferred tax asset in the year in which it originates?

Temporary differences that are cumulatively "favorable" are referred to as taxable temporary differences.

ASC 740 requires a publicly traded company to disclose the components of its deferred tax assets and liabilities only if the amounts are considered to be:

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

Filters