Question 1

All of the following are evidence to support recognition of a deferred income tax benefit except:

Accepted Answer

A) An excess of fair value over the tax basis of the enterprise's net assets in an amount sufficient to realize the deferred income tax asset. 
B) There are existing taxable temporary differences to absorb the loss. 
C) It is acceptable industry practice to recognize the deferred income tax benefit. 
D) A strong earnings history suggesting that losses are not expected to continue. 
A) An excess of fair value over the tax basis of the enterprise's net assets in an amount sufficient to realize the deferred income tax asset. 
B) There are existing taxable temporary differences to absorb the loss. 
C) It is acceptable industry practice to recognize the deferred income tax benefit. 
D) A strong earnings history suggesting that losses are not expected to continue.

Question 2

A Corporation that incurs a taxable loss is entitled to offset the loss as follows:

Accepted Answer

A) Carried back 10 years and forward 3 years 
B) Carried back 7 years and forward 3 years 
C) Carried back 3 years and forward 20 years 
D) Carried back 3 years and forward 10 years 
A) Carried back 10 years and forward 3 years 
B) Carried back 7 years and forward 3 years 
C) Carried back 3 years and forward 20 years 
D) Carried back 3 years and forward 10 years

Question 3

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 beginning of the year. 
C) The projected tax rate should be used to record a deferred income tax asset or liability. 
D) Once recorded, the deferred income tax asset must be maintained at a rate expected to be in effect when the carry forward is utilized. 
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 beginning of the year. 
C) The projected tax rate should be used to record a deferred income tax asset or liability. 
D) Once recorded, the deferred income tax asset must be maintained at a rate expected to be in effect when the carry forward is utilized.

Question 4

JG Ltd.has been in business for five years and incurs a loss of $520,000 in 20x15.The company has no temporary differences.The history of the company's earnings since they began operations is as follows:   The tax rate has been constant at 38%.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& (41

Question 5

JG Ltd.provided you with the following information:   There are no temporary differences.What is the tax recovery in 2015 assuming that a policy of tax refund maximization is followed?

Accepted Answer

A) $169,500 
B) $176,500 
C) $160,000 
D) Nil. 
A) $169,500 
B) $176,500 
C) $160,000 
D) Nil.

Question 6

What options are open to a company that had previously set up a deferred income tax benefit of a tax loss carry forward but has now determined that the probability of realization is less than 50%?

Accepted Answer

Companies must determine whether all or

Question 7

JMR Corporation suffered a loss in 2013.As a result, the Corporation has a $87,000 accumulated tax loss carry forward at the tax rate of 40%.The benefit was recorded in the accounts as JMR believed it was more likely than not to be realized.In 2014 the tax rate goes up to 45% and JMR has not yet used the benefit.Which of the following statements is true?

Accepted Answer

A) Deferred income tax asset-benefit should be increased by $1,740 
B) No change to the accounts is necessary 
C) Income tax expense should be increased by $1,740 
D) Income tax expense should be decreased by $4,350 
A) Deferred income tax asset-benefit should be increased by $1,740 
B) No change to the accounts is necessary 
C) Income tax expense should be increased by $1,740 
D) Income tax expense should be decreased by $4,350

Question 8

How should a deferred income tax benefit of a tax loss carry forward be treated on a yearly basis?

Accepted Answer

The benefit should be reviewed each year

Question 9

A company that has sustained a tax loss during the year and is not able to carry it back may potentially do all of the following except:

Accepted Answer

A) Choose not to claim CCA in the current year. 
B) Carry it forward the amount for 10 years. 
C) Do nothing. 
D) File amended tax returns for previous years changing CCA. 
A) Choose not to claim CCA in the current year. 
B) Carry it forward the amount for 10 years. 
C) Do nothing. 
D) File amended tax returns for previous years changing CCA.

Question 10

JMR Corporation suffered a loss in 2013.As a result, the Corporation has an $87,000 accumulated tax loss carry forward.The current tax rate is 40%.The benefit was recorded in the accounts, as JMR believed it was more likely than not to be realized.In 2014 the tax rate goes down to 38% and JMR has not yet used the benefit.Which of the following statements is true?

Accepted Answer

A) Deferred income tax asset-benefit will not change 
B) Income tax expense should be increased by $1,740 
C) Deferred income tax asset-benefit should be increased by $1,740 
D) No change to the accounts is necessary 
A) Deferred income tax asset-benefit will not change 
B) Income tax expense should be increased by $1,740 
C) Deferred income tax asset-benefit should be increased by $1,740 
D) No change to the accounts is necessary

Question 11

The following information pertains to ABC Inc.:   Assume that ABC Inc.meets the more likely than not criteria for tax loss carry forward recognition.The tax rate for 2015 and beyond is expected to be 20%, and this rate was enacted during 2014.This information would result in:

Accepted Answer

A) a Deferred Tax Asset - Carry forward in the amount of $135,000. 
B) a Deferred Tax Asset - Carry forward in the amount of $47,500. 
C) a Deferred Tax Asset - Carry forward in the amount of $38,000. 
D) a Deferred Tax Asset - Carry forward in the amount of $108,000. 
A) a Deferred Tax Asset - Carry forward in the amount of $135,000. 
B) a Deferred Tax Asset - Carry forward in the amount of $47,500. 
C) a Deferred Tax Asset - Carry forward in the amount of $38,000. 
D) a Deferred Tax Asset - Carry forward in the amount of $108,000.

Question 12

Loser Inc.reported the following pretax amounts for each of the last three years:   Additional Information:
The tax rate in Year 3 and prior was 20%.The tax rate for Year 4 and beyond will be 25% and is known by Loser in Year 3.
At the start of Year 3, Loser had a DTL balance of $50,000 due to the excess of CCA over depreciation taken by Loser up to that date.During Year 3, the company took $110,000 more CCA than depreciation.
During Year 3 the company bought a parcel of land, which it had to write down during the same period due to environmental contamination rendering a portion of the land non-usable.The amount of the write-down was $40,000.
Loser Inc.has a policy of carrying tax losses back as far as possible and carrying forward the balance (the more-likely-than-not)criteria has been met for any tax loss carry-forwards.
Loser Inc.currently has no capital gains, but it expects to have enough capital gains in the future against which it will be able to use any capital loss carry forwards.
The company uses a single account for all of its deferred tax asset/liability balances.
Required:
Prepare all the journal entries and show all Deferred Tax Asset and/or Liability balances as at the end of Year 3.

Accepted Answer

The answer of Loser Inc.reported the following pretax amounts for...

Question 13

Disclosure related to tax loss carry forwards and carry backs include all of the following except:

Accepted Answer

A) Current tax benefit from tax loss carry backs and carry forwards should be segregated between continuing operations, discontinued operations and extraordinary items. 
B) Disclosure of the expiry date of unrecognized tax losses. 
C) There should be disclosure of the amount of unrecognized tax losses. 
D) Whether a Valuation Allowance account was used. 
A) Current tax benefit from tax loss carry backs and carry forwards should be segregated between continuing operations, discontinued operations and extraordinary items. 
B) Disclosure of the expiry date of unrecognized tax losses. 
C) There should be disclosure of the amount of unrecognized tax losses. 
D) Whether a Valuation Allowance account was used.

Question 14

JG Ltd.has been in business for five years and incurs a loss of $520,000 in 20x15.The company has no temporary differences.The history of the company's earnings since they began operations is as follows:   The tax rate has been constant at 38%.Required:
Prepare journal entries to record the recovery of taxes and any journal entries necessary for any loss carry forwards.In 20x16, JG incurs a further loss of $40,000.The tax rate changed to 40%.Assume probability of recovery is greater than 50% in 20x15 but less than 50% in 20x16.

Accepted Answer

20x15 @#IMG-DLM& (410,000 .38) @#IMG-DLM& (520,000

Question 15

The following information pertains to XYZ Inc.:   Assuming that XYZ has a policy of applying its tax losses, sequentially, how much would the company be able to recover in taxes through the use of its 2014 tax loss?

Accepted Answer

A) $152,000 
B) $141,600 
C) $133,000 
D) $145,000 
A) $152,000 
B) $141,600 
C) $133,000 
D) $145,000

Question 16

Financial information related to Unip Limited's ("UL")2013 and 2014 fiscal year is:   UL's year-end is December 31.Prior to 2014, UL did not have any losses.The deferred tax liability account at the beginning of 2013 is $672,000.The tax rate in 2013 and 2014 is 40%.
Required:
1.a)Prepare the tax entry for 2013 and 2014.Assume UL claims the maximum CCA in 2014 and carries back the 2014 loss to 2013.
b)What is the balance in the deferred tax asset/liability account on December 31, 2014?
2.a)Prepare the 2013 and 2014 tax journal entries assuming the following:
In 2014 UL does not claim any CCA, the 2014 loss is carried back to 2013 and any unused losses will be carried forward.UL believe it is more likely than not (probability > 50%)that the unused loss carry forward will be utilized in the future.The pre-tax operating loss in 2014 is $3,432,000.Also, when filing the 2014 tax return, UL also re-files the 2013 return to eliminate the CCA claimed that year.
b)Under the assumptions in a), what is the balance in the deferred tax asset/liability account on December 31, 2014?

Accepted Answer

The answer of Financial information related to Unip Limited's ("UL")2013...

Question 17

KG Corporation incurred a tax loss of $345,000.Based on a tax rate of 38%, what is the potential tax benefit?

Accepted Answer

A) $0 
B) $345,000 
C) $131,100 
D) cannot be determined 
A) $0 
B) $345,000 
C) $131,100 
D) cannot be determined

Question 18

Deferred tax amounts must be revalued whenever substantially enacted tax rates change.

Accepted Answer

A) True 
 B)False

All of the following are evidence to support recognition of a deferred income tax benefit except:

A Corporation that incurs a taxable loss is entitled to offset the loss as follows:

Choose the best statement with respect to tax rates.

JG Ltd.provided you with the following information: There are no temporary differences.What is the tax recovery in 2015 assuming that a policy of tax refund maximization is followed?

What options are open to a company that had previously set up a deferred income tax benefit of a tax loss carry forward but has now determined that the probability of realization is less than 50%?

How should a deferred income tax benefit of a tax loss carry forward be treated on a yearly basis?

A company that has sustained a tax loss during the year and is not able to carry it back may potentially do all of the following except:

The following information pertains to ABC Inc.: Assume that ABC Inc.meets the more likely than not criteria for tax loss carry forward recognition.The tax rate for 2015 and beyond is expected to be 20%, and this rate was enacted during 2014.This information would result in:

Disclosure related to tax loss carry forwards and carry backs include all of the following except:

The following information pertains to XYZ Inc.: Assuming that XYZ has a policy of applying its tax losses, sequentially, how much would the company be able to recover in taxes through the use of its 2014 tax loss?

KG Corporation incurred a tax loss of $345,000.Based on a tax rate of 38%, what is the potential tax benefit?

Deferred tax amounts must be revalued whenever substantially enacted tax rates change.

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

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Exam 17: Tax Losses

All of the following are evidence to support recognition of a deferred income tax benefit except:

A Corporation that incurs a taxable loss is entitled to offset the loss as follows:

Choose the best statement with respect to tax rates.

JG Ltd.provided you with the following information: There are no temporary differences.What is the tax recovery in 2015 assuming that a policy of tax refund maximization is followed?

What options are open to a company that had previously set up a deferred income tax benefit of a tax loss carry forward but has now determined that the probability of realization is less than 50%?

How should a deferred income tax benefit of a tax loss carry forward be treated on a yearly basis?

A company that has sustained a tax loss during the year and is not able to carry it back may potentially do all of the following except:

The following information pertains to ABC Inc.: Assume that ABC Inc.meets the more likely than not criteria for tax loss carry forward recognition.The tax rate for 2015 and beyond is expected to be 20%, and this rate was enacted during 2014.This information would result in:

Disclosure related to tax loss carry forwards and carry backs include all of the following except:

The following information pertains to XYZ Inc.: Assuming that XYZ has a policy of applying its tax losses, sequentially, how much would the company be able to recover in taxes through the use of its 2014 tax loss?

KG Corporation incurred a tax loss of $345,000.Based on a tax rate of 38%, what is the potential tax benefit?

Deferred tax amounts must be revalued whenever substantially enacted tax rates change.

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