Exam 17: Accounting for Income Taxes

Grand River Corporation reported pretax book income of $500,000.Included in the computation were favorable temporary differences of $100,000,unfavorable temporary differences of $10,000,and favorable permanent differences of $80,000.The corporation's current income tax expense or benefit would be:

ASC 740 is the sole source of rules related to accounting for income taxes.

Which of the following statements best describes "book equivalent of taxable income" (BETI)?

Potential interest and penalties that would be assessed on a disallowed unrecognized tax benefit must be recorded in a company's income tax expense under ASC 740.

Brown Corporation reports $100,000 of gain from the sale of land on its income statement.For tax purposes,Brown uses the installment method and reports gain of $10,000.The $90,000 difference in the gain reported is a deductible temporary difference.

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.

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

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

A corporation evaluates the need for a valuation allowance by comparing both positive and negative evidence that the corporation will realize a deferred tax asset in the future.

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:

Whitman Corporation reported pretax book income of $400,000.Book depreciation exceeded tax depreciation by $100,000.In addition,the company accrued vacation pay of $50,000 that was not deductible until paid in the next year.Whitman has a net operating loss carryforward of $200,000 from the prior year.Compute the company's deferred income tax expense or benefit for the current year.

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.

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?

Once determined,an unrecognized tax benefit under ASC 740 is not readjusted for subsequent events.

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

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:

Which of the following statements best describes a valuation allowance as it relates to 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.

ASC 740 deals with accounting for uncertain tax positions.

Knollcrest Corporation has a cumulative book loss over the past 36 months.Which of the following statements best describes how this fact enters into the valuation allowance analysis?