Question 1

Which of the following taxes are included in the total income tax liability of a corporation reported on its Federal tax return?

Accepted Answer

A) Federal income taxes. 
B) Foreign income taxes. 
C) State income taxes. 
D) All the above taxes are included. 
A) Federal income taxes. 
B) Foreign income taxes. 
C) State income taxes. 
D) All the above taxes are included.

Question 2

A partnership owned at least 80% by a corporation is included in a consolidated group's U.S. income tax return.

Accepted Answer

A) True 
 B)False

Question 3

ASC 740 (FIN 48) addresses how an entity should report uncertain tax positions in their financial statements.

Accepted Answer

A) True 
 B)False

Question 4

The taxpayer should use ASC 740-30 (APB 23) income deferral only when the tax rates that apply to the subsidiary are less than those of the applicable U.S. income tax rate.

Accepted Answer

A) True 
 B)False

Question 5

The Jacobsen Corporation has determined the appropriate changes to its deferred tax accounts. The Jacobsen auditor now is discussing whether to place a valuation allowance against the deferred tax asset on the balance sheet. List some of the factors that the Jacobsen auditor will consider in this regard.

Accepted Answer

To determine whether a valuation allowan

Question 6

An example of a deferred tax asset is the excess of accelerated MACRS depreciation over GAAP straight-line depreciation.

Accepted Answer

A) True 
 B)False

Question 7

How are deferred tax liabilities and assets categorized on the balance sheet?

Accepted Answer

A) Capital and ordinary. 
B) Current and non-current. 
C) Domestic and foreign. 
D) Active, portfolio, and passive. 
E) Positive and negative. 
A) Capital and ordinary. 
B) Current and non-current. 
C) Domestic and foreign. 
D) Active, portfolio, and passive. 
E) Positive and negative.

Question 8

Jogg, Inc., earns book net income before tax of $600,000. Jogg puts into service a depreciable asset this year, and first year tax depreciation exceeds book depreciation by $120,000. Jogg has recorded no other temporary or permanent book-tax differences. Assuming that the U.S. tax rate is 35%, and that this is Jogg's first year of operations, what is Jogg's balance in its deferred tax asset and deferred tax liability accounts at year end?

Accepted Answer

A) $42,000 and $0. 
B) $0 and $0. 
C) $0 and $42,000. 
D) $42,000 and $42,000. 
A) $42,000 and $0. 
B) $0 and $0. 
C) $0 and $42,000. 
D) $42,000 and $42,000.

Question 9

Amelia, Inc., is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year. Assume a 34% corporate tax rate and no valuation allowance.   Amelia, Inc.'s, book income before tax is $25,200. Amelia records two permanent book-tax differences.
It earned $1,000 in tax-exempt municipal bond interest and $1,840 in nondeductible meals and
entertainment expense. Determine Amelia's change in net deferred tax asset or net deferred tax
liability for the current year, and provide the journal entry to record this amount.

Accepted Answer

None

Question 10

The operations of 80% or more owned domestic subsidiaries can be included in the parent corporation's consolidated tax return, if a proper election is made.

Accepted Answer

A) True 
 B)False

Question 11

Black, Inc., is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year. Assume a 35% corporate tax rate and no valuation allowance.
?   ?
Black, Inc.'s, book income before tax is $6,000. Black records two permanent book-tax differences.
It earned $250 in tax-exempt municipal bond interest, and it incurred $500 in nondeductible meals
and entertainment expense. Provide the journal entry to record Black's current tax expense.

Accepted Answer

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Question 12

Only U.S. corporations are included in a combined GAAP financial statement.

Accepted Answer

A) True 
 B)False

Question 13

Morrisson, Inc., earns book net income before tax of $500,000. In computing its book income, Morrisson deducts $50,000 more in warranty expense for book purposes than is allowed for tax purposes. Morrisson records no other temporary or permanent book-tax differences. Assuming that the U.S. tax rate is 35% and no valuation allowance is required, what is Morrisson's current income tax expense reported on its GAAP financial statements?

Accepted Answer

A) $192,500 
B) $175,000 
C) $157,500 
D) $17,500 
A) $192,500 
B) $175,000 
C) $157,500 
D) $17,500

Question 14

ASC 740 (FIN 48) is the GAAP equivalent of the Form 1120 Schedule UTP.

Accepted Answer

A) True 
 B)False

Question 15

Black, Inc., is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year. Assume a 35% corporate tax rate and no valuation allowance.   ​
Black, Inc.'s, book income before tax is $6,000. Black records two permanent book-tax differences.
It earned $250 in tax-exempt municipal bond interest, and it incurred $500 in nondeductible meals
and entertainment expense. Determine Black's change in net deferred tax asset or net deferred tax
liability for the current year, and provide the journal entry to record this amount.

Accepted Answer

The answer of Black, Inc., is a domestic corporation with...

Question 16

Black, Inc., is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year. Assume a 35% corporate tax rate and no valuation allowance.
?   Black, Inc.'s, book income before tax is $6,000. Black records two permanent book-tax differences. It earned $250 in tax-exempt municipal bond interest, and it incurred $500 in nondeductible meals and entertainment expense. Provide the journal entry to record Black's current tax expense.

Accepted Answer

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Question 17

The income tax footnote to the GAAP financial statements includes a reconciliation of a corporation's hypothetical tax on book income to its book tax expense as if it were taxed in full at the applicable U.S. income tax rates.

Accepted Answer

A) True 
 B)False

Question 18

You are assisting LipidCo, a U.S. corporation subject to GAAP, to determine its current-year book expense for income taxes. The following represent the steps that you will take in making this computation. Put the steps into the correct order.
A.Compute the deferred tax provision.
B.Determine book income before income tax effects.
C.Determine the current tax provision.
D.Determine whether a valuation allowance is required, and apply or release it.
E.Identify and measure temporary book-tax differences.
F.Prepare the disclosures for the financial statement footnotes.
G.Add/Subtract any permanent book-tax differences.

Accepted Answer

B. - G. -

Question 19

Black, Inc., is a domestic corporation with the following balance sheet for book and tax purposes at the end
of the year. Assume a 35% corporate tax rate and no valuation allowance.   ?
Black, Inc.'s, book income before tax is $6,000. Black records two permanent book-tax differences.
It earned $250 in tax-exempt municipal bond interest, and it incurred $500 in nondeductible meals
and entertainment expense. Determine the change in Black's deferred tax assets for the current year.

Accepted Answer

None

Question 20

Van Dyke, Inc., hopes to report a total book tax expense of $150,000 in the current year. This amount consists of $200,000 in current tax expense and a $50,000 tax benefit related to the expected future use of an NOL by Van Dyke. If the auditors determine that a valuation allowance of $20,000 must be placed against Van Dyke's deferred tax assets, what is Van Dyke's total book tax expense?

Accepted Answer

A) $150,000 
B) $170,000 
C) $200,000 
D) $250,000 
A) $150,000 
B) $170,000 
C) $200,000 
D) $250,000

Which of the following taxes are included in the total income tax liability of a corporation reported on its Federal tax return?

A partnership owned at least 80% by a corporation is included in a consolidated group's U.S. income tax return.

ASC 740 (FIN 48) addresses how an entity should report uncertain tax positions in their financial statements.

The taxpayer should use ASC 740-30 (APB 23) income deferral only when the tax rates that apply to the subsidiary are less than those of the applicable U.S. income tax rate.

An example of a deferred tax asset is the excess of accelerated MACRS depreciation over GAAP straight-line depreciation.

How are deferred tax liabilities and assets categorized on the balance sheet?

The operations of 80% or more owned domestic subsidiaries can be included in the parent corporation's consolidated tax return, if a proper election is made.

Only U.S. corporations are included in a combined GAAP financial statement.

ASC 740 (FIN 48) is the GAAP equivalent of the Form 1120 Schedule UTP.

The income tax footnote to the GAAP financial statements includes a reconciliation of a corporation's hypothetical tax on book income to its book tax expense as if it were taxed in full at the applicable U.S. income tax rates.

Understanding and Working With the Federal Tax Law

Corporations Introduction and Operating Rules

Corporations Special Situations

Corporations Organization and Capital Structure

Corporations Earnings Profits and Dividend Distributions

Corporations Redemptions and Liquidations

Corporations Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships Formation Operation and Basis

Partnerships Distributions Transfer of Interests and Terminations

S Corporations

Comparative Forms of Doing Business

Exempt Entities

Multi-State Corporate Taxations

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters

Exam 14: Taxes on the Financial Statements

Which of the following taxes are included in the total income tax liability of a corporation reported on its Federal tax return?

A partnership owned at least 80% by a corporation is included in a consolidated group's U.S. income tax return.

ASC 740 (FIN 48) addresses how an entity should report uncertain tax positions in their financial statements.

The taxpayer should use ASC 740-30 (APB 23) income deferral only when the tax rates that apply to the subsidiary are less than those of the applicable U.S. income tax rate.

An example of a deferred tax asset is the excess of accelerated MACRS depreciation over GAAP straight-line depreciation.

How are deferred tax liabilities and assets categorized on the balance sheet?

The operations of 80% or more owned domestic subsidiaries can be included in the parent corporation's consolidated tax return, if a proper election is made.

Only U.S. corporations are included in a combined GAAP financial statement.

ASC 740 (FIN 48) is the GAAP equivalent of the Form 1120 Schedule UTP.

The income tax footnote to the GAAP financial statements includes a reconciliation of a corporation's hypothetical tax on book income to its book tax expense as if it were taxed in full at the applicable U.S. income tax rates.

Understanding and Working With the Federal Tax Law

Corporations Introduction and Operating Rules

Corporations Special Situations

Corporations Organization and Capital Structure

Corporations Earnings Profits and Dividend Distributions

Corporations Redemptions and Liquidations

Corporations Reorganizations

Consolidated Tax Returns

Taxation of International Transactions

Partnerships Formation Operation and Basis

Partnerships Distributions Transfer of Interests and Terminations

S Corporations

Comparative Forms of Doing Business

Exempt Entities

Multi-State Corporate Taxations

Tax Practice and Ethics

The Federal Gift and Estate Taxes

Family Tax Planning

Income Taxation of Trusts and Estates

Filters