Question 1

Which statement is correct?

Accepted Answer

A) IFRS allows the taxes payable method because it is consistent with accrual accounting generally and with the IFRS Conceptual Framework. 
B) The taxes payable method is similar to accrual basis accounting and reflects the effect of transactions when they occur. 
C) ASPE permits the taxes payable approach because of the different costs and benefits faced by private enterprises. 
D) Recording the effect of deferred taxes is inconsistent with the definition and recognition criteria for assets and liabilities. 
A) IFRS allows the taxes payable method because it is consistent with accrual accounting generally and with the IFRS Conceptual Framework. 
B) The taxes payable method is similar to accrual basis accounting and reflects the effect of transactions when they occur. 
C) ASPE permits the taxes payable approach because of the different costs and benefits faced by private enterprises. 
D) Recording the effect of deferred taxes is inconsistent with the definition and recognition criteria for assets and liabilities.

Question 2

What is a deferred tax asset?

Accepted Answer

A) A deductible temporary difference that results in future taxable income being less than accounting income. 
B) The amount of income tax recoverable in future periods as a result of deductible temporary differences, losses carried forward, or tax credits carried forward. 
C) A deductible temporary difference that results in future taxable income being higher than accounting income. 
D) The amount of income tax payable in future periods as a result of taxable temporary differences. 
A) A deductible temporary difference that results in future taxable income being less than accounting income. 
B) The amount of income tax recoverable in future periods as a result of deductible temporary differences, losses carried forward, or tax credits carried forward. 
C) A deductible temporary difference that results in future taxable income being higher than accounting income. 
D) The amount of income tax payable in future periods as a result of taxable temporary differences.

Question 3

Which accurately describes the purpose of the taxes payable method?

Accepted Answer

A) It represents the amount of income recognized for accounting purposes. 
B) It represents the amount of income recognized for tax purposes. 
C) It calculates tax expense based on the accounting income before tax. 
D) It calculates tax expense based on the amount payable to tax authorities. 
A) It represents the amount of income recognized for accounting purposes. 
B) It represents the amount of income recognized for tax purposes. 
C) It calculates tax expense based on the accounting income before tax. 
D) It calculates tax expense based on the amount payable to tax authorities.

Question 4

Which statement is correct about the "taxes payable method"?

Accepted Answer

A) It is the accounting method used under both ASPE and IFRS. 
B) It records an amount for income tax equal to the tax payments required. 
C) It matches income with the associated income tax expense. 
D) It records an amount for income tax equal to the net income before tax. 
A) It is the accounting method used under both ASPE and IFRS. 
B) It records an amount for income tax equal to the tax payments required. 
C) It matches income with the associated income tax expense. 
D) It records an amount for income tax equal to the net income before tax.

Question 5

Why is the taxes payable method not an accepted approach under IFRS? What difference explains why ASPE permits this approach in addition to the accrual approach?

Accepted Answer

IFRS does not allow the taxes payable me

Question 6

Which method reflects the tax effect in the period that tax is payable?

Accepted Answer

A) Accrual method. 
B) Taxes payable method. 
C) Deferral method. 
D) Tax allocation method. 
A) Accrual method. 
B) Taxes payable method. 
C) Deferral method. 
D) Tax allocation method.

Question 7

What is one reason to use the taxes payable method?

Accepted Answer

A) It is a complicated method, but results in the least tax expense. 
B) A company only pays tax once a year under this method. 
C) It results in the best matching for the balance sheet. 
D) It is the least costly method for tax accounting. 
A) It is a complicated method, but results in the least tax expense. 
B) A company only pays tax once a year under this method. 
C) It results in the best matching for the balance sheet. 
D) It is the least costly method for tax accounting.

Question 8

A company has income before tax of $200,000. The company also has a temporary difference of $80,000 relating to capital cost allowance (CCA)in excess of depreciation expense recorded for the year. There are no other permanent or temporary differences. The income tax rate is 40%. The taxes payable are:

Accepted Answer

A) $48,000 
B) $80,000 
C) $112,000 
D) $32,000 
A) $48,000 
B) $80,000 
C) $112,000 
D) $32,000

Question 9

What is the opening balance of the deferred tax liability account considering the rate change?

Accepted Answer

A) 100,000 debit 
B) 100,000 credit 
C) 120,000 debit 
D) 120,000 credit 
A) 100,000 debit 
B) 100,000 credit 
C) 120,000 debit 
D) 120,000 credit

Question 10

Which statement is correct?

Accepted Answer

A) Financial reporting rules are generally consistent with tax reporting rules. 
B) Tax rules are generally consistent the principles used in accrual accounting. 
C) Tax rules generally require a higher degree of reliability than financial reporting. 
D) Accounting income is generally similar to taxable income. 
A) Financial reporting rules are generally consistent with tax reporting rules. 
B) Tax rules are generally consistent the principles used in accrual accounting. 
C) Tax rules generally require a higher degree of reliability than financial reporting. 
D) Accounting income is generally similar to taxable income.

Question 11

Why does Capital Cost Allowance (CCA)usually exceed the amount of depreciation for tax purposes?

Accepted Answer

Capital cost allowance (CCA)usually exce

Question 12

Describe what is meant by a timing difference.

Accepted Answer

A timing difference arises fro

Question 13

Which statement is correct?

Accepted Answer

A) Undepreciated capital cost (UC
C) is the net carrying amount of an asset or asset class for tax purposes. 
B) A deductible temporary difference is a temporary difference that results in future taxable income being more than accounting income. 
C) A terminal loss is the tax loss arising from the sale of an asset for proceeds above its undepreciated capital cost. 
D) Recaptured depreciation is the taxable income recorded for the reversal of previous capital cost allowance when the sale proceeds of an asset are less than its undepreciated capital cost. 
A) Undepreciated capital cost (UC
C) is the net carrying amount of an asset or asset class for tax purposes. 
B) A deductible temporary difference is a temporary difference that results in future taxable income being more than accounting income. 
C) A terminal loss is the tax loss arising from the sale of an asset for proceeds above its undepreciated capital cost. 
D) Recaptured depreciation is the taxable income recorded for the reversal of previous capital cost allowance when the sale proceeds of an asset are less than its undepreciated capital cost.

Question 14

A large public company reported that its provision for income taxes was $500 million and that it has a deferred tax liability of 2 billion. A Member of Parliament calls you and says, "I see hundreds of companies who have these huge deferred tax liabilities on their balance sheets. If the government could get even half of what's owed, it could cut the public deficit down to size in a hurry."
Required:
Write a memo to the Member of Parliament explaining the issues.

Accepted Answer

To: Member of Parliament
From:
Re: Provi

Question 15

When will a terminal loss occur?

Accepted Answer

A) When proceeds of disposal are less than undepreciated capital cost. 
B) When proceeds of disposal are between undepreciated capital cost and original cost. 
C) When proceeds of disposal are more than undepreciated capital cost. 
D) When proceeds of disposal are less than original cost. 
A) When proceeds of disposal are less than undepreciated capital cost. 
B) When proceeds of disposal are between undepreciated capital cost and original cost. 
C) When proceeds of disposal are more than undepreciated capital cost. 
D) When proceeds of disposal are less than original cost.

Question 16

The following summarizes information relating to Gonzalez Corporation's operations for the current year.   Required:
Compute the amount of taxes payable and income tax expense for Gonzalez Corporation.

Accepted Answer

The answer of The following summarizes information relating to Gonzalez...

Question 17

A company has a deferred tax liability of $120,000 at the beginning of the fiscal year relating to a taxable temporary difference of $300,000. The current year tax rate is 50%.
Required:
Provide the journal entry to reflect the tax rate change.

Accepted Answer

The tax rate associated with t

Question 18

A company earned $860,000 in pre-tax income, while its tax return showed taxable income of $560,000. At a tax rate of 40%, how much is the income tax expense under the taxes payable method permitted under ASPE?

Accepted Answer

A) $224,000 
B) $344,000 
C) $120,000 
D) $196,000 
A) $224,000 
B) $344,000 
C) $120,000 
D) $196,000

Question 19

Explain the large and growing amount of deferred tax liabilities on corporations' balance sheets mentioned in the opening vignette of this chapter.

Accepted Answer

Temporary differences due to depreciatio

Question 20

What adjustment is required to the opening deferred taxes as a result of the rate change?

Accepted Answer

A) 40,000 debit 
B) 40,000 credit 
C) 130,000 credit 
D) 190,000 credit 
A) 40,000 debit 
B) 40,000 credit 
C) 130,000 credit 
D) 190,000 credit

Which statement is correct?

What is a deferred tax asset?

Which accurately describes the purpose of the taxes payable method?

Which statement is correct about the "taxes payable method"?

Why is the taxes payable method not an accepted approach under IFRS? What difference explains why ASPE permits this approach in addition to the accrual approach?

Which method reflects the tax effect in the period that tax is payable?

What is one reason to use the taxes payable method?

What is the opening balance of the deferred tax liability account considering the rate change?

Which statement is correct?

Why does Capital Cost Allowance (CCA)usually exceed the amount of depreciation for tax purposes?

Describe what is meant by a timing difference.

Which statement is correct?

When will a terminal loss occur?

The following summarizes information relating to Gonzalez Corporation's operations for the current year. Required: Compute the amount of taxes payable and income tax expense for Gonzalez Corporation.

A company has a deferred tax liability of $120,000 at the beginning of the fiscal year relating to a taxable temporary difference of $300,000. The current year tax rate is 50%. Required: Provide the journal entry to reflect the tax rate change.

A company earned $860,000 in pre-tax income, while its tax return showed taxable income of $560,000. At a tax rate of 40%, how much is the income tax expense under the taxes payable method permitted under ASPE?

Explain the large and growing amount of deferred tax liabilities on corporations' balance sheets mentioned in the opening vignette of this chapter.

What adjustment is required to the opening deferred taxes as a result of the rate change?

Current Liabilities and Contingencies

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Pensions and Other Employee Future Benefits

Accounting for Leases

Accounting Changes

Statement of Cash Flows

Filters

Exam 8: Accounting for Income Taxes

Which statement is correct?

What is a deferred tax asset?

Which accurately describes the purpose of the taxes payable method?

Which statement is correct about the "taxes payable method"?

Why is the taxes payable method not an accepted approach under IFRS? What difference explains why ASPE permits this approach in addition to the accrual approach?

Which method reflects the tax effect in the period that tax is payable?

What is one reason to use the taxes payable method?

What is the opening balance of the deferred tax liability account considering the rate change?

Which statement is correct?

Why does Capital Cost Allowance (CCA)usually exceed the amount of depreciation for tax purposes?

Describe what is meant by a timing difference.

Which statement is correct?

When will a terminal loss occur?

The following summarizes information relating to Gonzalez Corporation's operations for the current year. Required: Compute the amount of taxes payable and income tax expense for Gonzalez Corporation.

A company has a deferred tax liability of $120,000 at the beginning of the fiscal year relating to a taxable temporary difference of $300,000. The current year tax rate is 50%. Required: Provide the journal entry to reflect the tax rate change.

A company earned $860,000 in pre-tax income, while its tax return showed taxable income of $560,000. At a tax rate of 40%, how much is the income tax expense under the taxes payable method permitted under ASPE?

Explain the large and growing amount of deferred tax liabilities on corporations' balance sheets mentioned in the opening vignette of this chapter.

What adjustment is required to the opening deferred taxes as a result of the rate change?

Current Liabilities and Contingencies

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Pensions and Other Employee Future Benefits

Accounting for Leases

Accounting Changes

Statement of Cash Flows

Filters