Exam 17: Accounting for Income Taxes

Whitman Corporation reported pretax book income of $400,000 in 2017. Book depreciationexceeded tax depreciation by $100,000. In addition, the Company accrued vacation pay of $50,000 that was not deductible until paid in 2018. Whitman has a net operating loss carryforward of$200,000 from 2016. Assuming a tax rate of 34%, compute the Company's deferred income taxexpense or benefit for 2017.

Robinson Company had a net deferred tax liability of $34,000 at the beginning of the year, representing a net taxable temporary difference of $100,000. During the year, Robinson reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000 and unfavorable temporary differences of$20,000. During the year, the company's tax rate increased from 34% to 35%. Robinson's deferred income tax expense or benefit for the current year would be:

Costello Corporation reported pretax book income of $500,000. During the current year, the reserve for bad debts increased by $5,000. In addition, tax depreciation exceeded book depreciation by $40,000. Finally, Costello received $3,000 of tax-exempt lifeinsurance proceeds from the death of one of its officers. Using a tax rate of 34%, Costello's deferred income tax expense or benefit would be:

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

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

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:

Weaver Company had a net deferred tax liability of $34,000 at the beginning of the year, representing a net taxable temporary difference of $100,000. During the year, Weaverreported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000 and unfavorable temporary differences of $20,000. During the year, the company's tax rate decreased from 34% to 30%. Weaver's deferred income tax expense or benefit for the current year would be:

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

Which of the following best describes the focus of ASC 740?

Which of the following items does not result in a permanent difference?

Assume Congress reduces the corporate tax rate from 35 percent to 25 percent effective in 2017. The tax rate change will affect only deferred tax assets and liabilities that arise in 2017 and thereafter.

A cumulative financial accounting (book) loss over three years likely would be considered significant negative evidence in a valuation allowance analysis.

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. Using a tax rate of 34%, compute Frost's deferred income tax expense or benefit.

The focus of ASC 740 is the income statement.

Which of the following statements best describes the ASC 740 process for evaluating a company's uncertain tax positions?

Brown Corporation reports $100,000 of gain from the sale of land on its incomestatement. 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.

Temporary differences that are cumulatively "favorable" are defined as taxable temporary differences.

Which of the following statements best describes the objective(s) of ASC 740?

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

Which of the following items is not a temporary difference?