Exam 8: Accounting for Income Taxes

A company has income before tax of $350,000, which includes a permanent difference of $65,000 relating to non-taxable dividend income. There are no other permanent or temporary differences. The income tax rate is 45%. Required: Compute the amount of taxes payable and income tax expense.

In the first two years of operations, a company reports taxable income of $125,000 and $65,000, respectively. In the first two years, the company paid $50,000 and $13,000. It is now the end of the third year, and the company has a loss of $160,000 for tax purposes. The company carries losses to the earliest year possible. The tax rate is currently 25%. Required: Compute the amount of income tax payable or receivable in the current (third)year.

Which statement is not correct?

When will there be recapture and a capital gain?

What is the ending balance of the current year deferred tax liability?

In the first year of operations, a company reports taxable income of $225,000 and paid a tax rate of 28%. It is now the end of the second year, and the company has a loss of $375,000 for tax purposes. The company's management believes it is probable the company will be able to use up its tax losses. The tax rate is currently 32%. Required: Compute the amounts of income tax receivable and/ or deferred income tax asset in the current (second)year.

At the beginning of the current fiscal year, Withering Corporation had a deferred income tax liability balance of $20,000, which relates to depreciable assets. During the year, Withering reported the following information: • Income before income taxes for the year was $300,000 and the tax rate was 45%. • Depreciation expense was $150,000 and CCA was $130,000. • Unearned rent revenue was reported at $120,000. Rent revenue is taxable when the cash is received. There was no opening balance in the unearned rent revenue account at the beginning of the year. • No other items affected deferred tax amounts other than these transactions. Required: Prepare the journal entry or entries to record income taxes for the year.

State whether or not discounting of deferred assets and liabilities is required or permitted and explain why or why not.

A company had taxable income of $2 million in fiscal 2019 and paid taxes of 0.4 million; the company incurred a loss of $0.5 million in fiscal 2021 when the tax rate is 30%. How much refund is the company entitled to?

Explain why a company should carry back losses and why a company might choose to carry losses forward instead.

In the first year of operations, a company reports taxable income of $125,000 and paid $31,250 of income taxes. It is now the end of the second year, and the company has a loss of $175,000 for tax purposes. The company's management believes it is probable the company will be able to use up its tax losses. The tax rate is currently 40%. Required: Compute the amounts of income tax receivable and/ or deferred income tax asset in the current (second)year.

When will there be a recapture of depreciation?

Which statement is accurate?

In the first two years of operations, a company reports taxable income of $125,000 and $165,000, respectively. In the first two years, the tax rates were 44% and 48% respectively. It is now the end of the third year, and the company has a loss of $260,000 for tax purposes. The company carries losses to the earliest year possible. The tax rate is currently 25%. Required: a. How much tax was paid in year 1 and year 2? b. Compute the amount of income tax payable or receivable in the current (third)year.

In its first year of operations, a company reported taxable income of $200,000. In its second year the company incurred a $250,000 loss. During these first two years, the tax rates were 30% and 35% respectively. It is now the end of the third year, and the company a taxable income of $260,000. The company carries losses to the earliest year possible. The tax rate is currently 40%. The amount of income tax receivable or payable in the current (third)year is:

Which of the following is an example of a "permanent difference"?

A company earns $490,000 in pre-tax income, while its tax return shows taxable income of $380,000. At a tax rate of 35%, how much is the income tax expense under the taxes payable method permitted under ASPE?

Describe what is meant by a permanent difference.