Question 1

Companies normally apply tax loss carry backs sequentially.

Accepted Answer

A) True 
 B)False

Question 2

Choose the best statement with respect to tax rates.

Accepted Answer

A) The current tax rate should be used to record a deferred income tax asset or liability. 
B) The tax rate used to record a deferred income tax asset or liability should be the enacted tax rate at the balance sheet date. 
C) The projected tax rate should be used to record a deferred income tax asset or liability. 
D) None of these answers are correct. 
A) The current tax rate should be used to record a deferred income tax asset or liability. 
B) The tax rate used to record a deferred income tax asset or liability should be the enacted tax rate at the balance sheet date. 
C) The projected tax rate should be used to record a deferred income tax asset or liability. 
D) None of these answers are correct.

Question 3

The terms "probable" and "more likely than not" refer to probabilities that are greater than or equal to 50%.

Accepted Answer

A) True 
 B)False

Question 4

KAR Ltd.has been in business for five years and incurs a loss of $320,000 in 20x15.The company has no temporary differences.The history of the company's earnings since they began operations is a follows:   The tax rate has been constant at 40%.Required:
Prepare journal entries to record the recovery of taxes and any journal entries necessary for any loss carry forwards.Assume probability of recovery is less than 50%

Accepted Answer

20x15 @#IMG-DLM& (130,000 + 30,000).40
N

Question 5

Existing sufficient taxable temporary differences, which will result in taxable income, is one piece of evidence to support a more likely than not criteria.

Accepted Answer

A) True 
 B)False

Question 6

Under ASPE, deferred income tax assets due to carry forwards may or may not be recognized, depending whether the company uses the taxes payable method.

Accepted Answer

A) True 
 B)False

Question 7

VB Corporation incurred a tax loss of $86,000.Based on a tax rate of 45% what is the potential tax benefit?

Accepted Answer

A) $38,700 
B) $0 
C) $86,000 
D) cannot be determined 
A) $38,700 
B) $0 
C) $86,000 
D) cannot be determined

Question 8

In general, deferred income tax assets due to tax loss carry forwards only to the extent that they are likely to be realized.

Accepted Answer

A) True 
 B)False

Question 9

A company will show the same income tax expense/benefit regardless of whether or not a valuation allowance account is used.

Accepted Answer

A) True 
 B)False

Question 10

Taxes are recovered at the rate at which it was originally paid.The tax rate in the year the loss occurs is not relevant.

Accepted Answer

A) True 
 B)False

Question 11

A tax benefit represents the present and deferred benefit that the company will be able to realize from the tax loss through a reduction of income taxes paid to governments.

Accepted Answer

A) True 
 B)False

Question 12

MDB had a $1,200 temporary tax difference for deferred gross margin on instalment sales at the end of 2012.This temporary difference will reverse equally during 2013, 2014, and 2015.The enacted corporate income tax rate is 25% and Parliament is discussing an increase in the corporate income tax rates for 2014 and 2015 to 35%.The deferred income tax liability related to this temporary difference at the end of 2013 would be:

Accepted Answer

A) $300 
B) $200 
C) $420 
D) $100 
A) $300 
B) $200 
C) $420 
D) $100

Question 13

VB Ltd.provided you with the following information:   There are no temporary differences.The deferred income tax benefit of the loss carry forward was set up in 2015 as the probability of realization was greater than 50%.In 2016 a further loss of $140,000 was incurred.Management determined that they were still mor likely than not to realize the loss.The tax rate for 2016 was 45%.What would be the carrying amount of the deferred income tax benefit/loss carry forward on the balance sheet at the end of 2016?

Accepted Answer

A) $141,500 
B) $127,600 
C) $273,600 
D) $139,500 
A) $141,500 
B) $127,600 
C) $273,600 
D) $139,500

Question 14

Once a deferred benefit of a tax loss carry forward has been recorded, does it have to remain on the
balance sheet until realized? Explain.

Accepted Answer

The deferred benefit should be analyzed

Question 15

EGR Ltd.has been in business for five years and incurs a loss of $320,000 in 20x15.The company has no temporary differences.The history of the company's earnings since they began operations is a follows:   The tax rate has been constant at 40%.Required:
Prepare journal entries to record the recovery of taxes and any journal entries necessary for any loss carry forwards.Assume probability of recovery is greater than 50%

Accepted Answer

20x15 @#IMG-DLM& (130,000 + 30

Question 16

JR Company incurred a loss in 2011, due in part to a fire at one of its plants.The deferred benefit of a loss carry forward was not recognized in the year as the probability of realization was less than 50%.In 2012, JR Company incurred a small loss, but due to large contracts upcoming, it was determined that the probability of realization was greater than 50%.The tax rate for 2011 was 40% and 2012 45%.JR Company should:

Accepted Answer

A) Record the deferred income tax benefit for 2011 only. 
B) Record the deferred income tax benefit for both years using the 45% rate. 
C) Record the deferred income tax benefit for 2012 only. 
D) Record the deferred income tax benefit for both years using the 40% rate. 
A) Record the deferred income tax benefit for 2011 only. 
B) Record the deferred income tax benefit for both years using the 45% rate. 
C) Record the deferred income tax benefit for 2012 only. 
D) Record the deferred income tax benefit for both years using the 40% rate.

Question 17

The following information for JG Corporation is available:   JG carries applies its tax losses sequentially, that is, tax losses are carried back as far as possible.The taxes recovered for the year ended 2014 amounted to:

Accepted Answer

A) $46,600. 
B) $59,100. 
C) $52,660. 
D) $48,600. 
A) $46,600. 
B) $59,100. 
C) $52,660. 
D) $48,600.

Question 18

Carry back and carry forward procedures for temporary differences are always applied, even when there are no temporary differences for deductible items, and there are no current income taxes payable.

Accepted Answer

A) True 
 B)False

Question 19

Reducing CCA is one tax strategy that a company may employ.All of the following are true except:

Accepted Answer

A) CCA is an optional deduction and is not lost if not used. 
B) Returns may be amended for the previous twenty years. 
C) CCA may be eliminated in the carry forward years. 
D) Minimizing CCA can create taxable income so that losses may be used. 
A) CCA is an optional deduction and is not lost if not used. 
B) Returns may be amended for the previous twenty years. 
C) CCA may be eliminated in the carry forward years. 
D) Minimizing CCA can create taxable income so that losses may be used.

Question 20

If a corporation incurs a taxable loss, they are entitled to carry the loss back for three years or forward for twenty years.

Accepted Answer

A) True 
 B)False

Companies normally apply tax loss carry backs sequentially.

Choose the best statement with respect to tax rates.

The terms "probable" and "more likely than not" refer to probabilities that are greater than or equal to 50%.

Existing sufficient taxable temporary differences, which will result in taxable income, is one piece of evidence to support a more likely than not criteria.

Under ASPE, deferred income tax assets due to carry forwards may or may not be recognized, depending whether the company uses the taxes payable method.

VB Corporation incurred a tax loss of $86,000.Based on a tax rate of 45% what is the potential tax benefit?

In general, deferred income tax assets due to tax loss carry forwards only to the extent that they are likely to be realized.

A company will show the same income tax expense/benefit regardless of whether or not a valuation allowance account is used.

Taxes are recovered at the rate at which it was originally paid.The tax rate in the year the loss occurs is not relevant.

A tax benefit represents the present and deferred benefit that the company will be able to realize from the tax loss through a reduction of income taxes paid to governments.

Once a deferred benefit of a tax loss carry forward has been recorded, does it have to remain on the balance sheet until realized? Explain.

The following information for JG Corporation is available: JG carries applies its tax losses sequentially, that is, tax losses are carried back as far as possible.The taxes recovered for the year ended 2014 amounted to:

Carry back and carry forward procedures for temporary differences are always applied, even when there are no temporary differences for deductible items, and there are no current income taxes payable.

Reducing CCA is one tax strategy that a company may employ.All of the following are true except:

If a corporation incurs a taxable loss, they are entitled to carry the loss back for three years or forward for twenty years.

Financial Liabilities and Provisions

Financial Instruments: Long-Term Debt

Shareholders Equity

Financial Instruments: Complex Debt and Equity

Corporate Income Tax

Leases

Post-Employment Benefits

Earnings Per Share

Accounting Changes

Financial Statement Analysis

Filters

Exam 17: Tax Losses

Companies normally apply tax loss carry backs sequentially.

Choose the best statement with respect to tax rates.

The terms "probable" and "more likely than not" refer to probabilities that are greater than or equal to 50%.

Existing sufficient taxable temporary differences, which will result in taxable income, is one piece of evidence to support a more likely than not criteria.

Under ASPE, deferred income tax assets due to carry forwards may or may not be recognized, depending whether the company uses the taxes payable method.

VB Corporation incurred a tax loss of $86,000.Based on a tax rate of 45% what is the potential tax benefit?

In general, deferred income tax assets due to tax loss carry forwards only to the extent that they are likely to be realized.

A company will show the same income tax expense/benefit regardless of whether or not a valuation allowance account is used.

Taxes are recovered at the rate at which it was originally paid.The tax rate in the year the loss occurs is not relevant.

A tax benefit represents the present and deferred benefit that the company will be able to realize from the tax loss through a reduction of income taxes paid to governments.

Once a deferred benefit of a tax loss carry forward has been recorded, does it have to remain on the balance sheet until realized? Explain.

The following information for JG Corporation is available: JG carries applies its tax losses sequentially, that is, tax losses are carried back as far as possible.The taxes recovered for the year ended 2014 amounted to:

Carry back and carry forward procedures for temporary differences are always applied, even when there are no temporary differences for deductible items, and there are no current income taxes payable.

Reducing CCA is one tax strategy that a company may employ.All of the following are true except:

If a corporation incurs a taxable loss, they are entitled to carry the loss back for three years or forward for twenty years.

Financial Liabilities and Provisions

Financial Instruments: Long-Term Debt

Shareholders Equity

Financial Instruments: Complex Debt and Equity

Corporate Income Tax

Leases

Post-Employment Benefits

Earnings Per Share

Accounting Changes

Financial Statement Analysis

Filters