Question 1

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 2

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 3

Placard, a multinational corporation based in the U.S., has used ASC 740-30 (APB 23) to avoid reporting any U.S. deferred tax expense on $50 million of the earnings of its foreign subsidiaries. All of these subsidiaries operate in countries with lower tax rates than those of the U.S. When the profits eventually are repatriated, how is Placard's effective tax rate affected on its GAAP financial statements?

Accepted Answer

Because Placard used ASC 740-30 (APB 23)

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

Qute, Inc., earns book net income before tax of $500,000. In computing its book income, Qute deducts $50,000 more in warranty expense for book purposes than is allowed for tax purposes. Qute 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 Qute's total 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 6

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. What is Amelia's total provision for income tax expense reported on its financial statement and its book net income after tax?

Accepted Answer

None

Question 7

Which of the following statements best describes considerations regarding a company's tax expense that may be made by users of GAAP financial statements?

Accepted Answer

A) The breakdown of tax expense between current and deferred may provide useful information regarding the comparison of tax burdens between companies. 
B) An analysis of earnings before interest, taxes, depreciation, and amortization (EBITD
A)  is often a better approach to comparing operating results of two companies. 
C) One-time effects within a company's effective tax rate should be removed before comparing effective tax rates across companies (or across years for the same company). 
D) All the above observations are correct. 
A) The breakdown of tax expense between current and deferred may provide useful information regarding the comparison of tax burdens between companies. 
B) An analysis of earnings before interest, taxes, depreciation, and amortization (EBITD
A)  is often a better approach to comparing operating results of two companies. 
C) One-time effects within a company's effective tax rate should be removed before comparing effective tax rates across companies (or across years for the same company). 
D) All the above observations are correct.

Question 8

The IRS decides upon audit whether the taxpayer can claim the tax deferral benefits of ASC 740-30.

Accepted Answer

A) True 
 B)False

Question 9

The IRS decides upon audit whether the taxpayer can claim the tax deferral benefits of ASC 740-30 (APB 23).

Accepted Answer

A) True 
 B)False

Question 10

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 the change in Amelia's deferred tax assets for the current year.

Accepted Answer

None

Question 11

If a corporation has no operations outside the U.S., its GAAP book and taxable income are identical.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

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.

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.

Which of the following statements best describes considerations regarding a company's tax expense that may be made by users of GAAP financial statements?

The IRS decides upon audit whether the taxpayer can claim the tax deferral benefits of ASC 740-30.

The IRS decides upon audit whether the taxpayer can claim the tax deferral benefits of ASC 740-30 (APB 23).

If a corporation has no operations outside the U.S., its GAAP book and taxable income are identical.

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

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

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.

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.

Which of the following statements best describes considerations regarding a company's tax expense that may be made by users of GAAP financial statements?

The IRS decides upon audit whether the taxpayer can claim the tax deferral benefits of ASC 740-30.

The IRS decides upon audit whether the taxpayer can claim the tax deferral benefits of ASC 740-30 (APB 23).

If a corporation has no operations outside the U.S., its GAAP book and taxable income are identical.

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

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