Question 1

The general terminology used to describe income tax expense when shown on the statement of comprehensive income is:

Accepted Answer

A) Tax expense 
B) Income tax benefit 
C) Provision for income tax expense 
D) Income tax expense 
A) Tax expense 
B) Income tax benefit 
C) Provision for income tax expense 
D) Income tax expense

Question 2

GFH had pre-tax accounting income of $5,600 during 2014.GFH used accelerated depreciation for tax purposes ($4,000)and straight-line depreciation for financial accounting purposes ($800).During 2014 GFH accrued warranty expenses of $3,600 and paid $2,000 cash to honour warranties.GFH's taxable income for 2014 would be (show calculations):

Accepted Answer

$5,600 - $4,000 + $8

Question 3

KER commenced operations in 2013.The company had recorded an accrual for warranty in its books during the year ended December 31, 2014 amounting to $100,000.During the year 2014, customers required service from goods sold in 2013 amounting to $60,000.No similar expenditures were made during 2013.KER accrued warranty expenses totalling $100,000 for 2013 and 2014.As a result of the information above, what is the amount of deferred taxes that will appear on the 2014 statement of financial position? KER adheres to ASPE and has elected to use the Taxes Payable Method.
Assume a 20% tax rate for both years.

Accepted Answer

A) A Deferred tax asset of $8,000 
B) Nil. 
C) A Deferred tax liability of $8,000 
D) A Deferred tax asset of $40,000 
A) A Deferred tax asset of $8,000 
B) Nil. 
C) A Deferred tax liability of $8,000 
D) A Deferred tax asset of $40,000

Question 4

Temporary differences relate only to items that will be recognized on both the income statement and the tax return, but in different reporting periods.

Accepted Answer

A) True 
 B)False

Question 5

A temporary difference that is deductible in future years is called:

Accepted Answer

A) A deferred tax asset 
B) A permanent tax liability 
C) A permanent tax asset 
D) A deferred tax liability 
A) A deferred tax asset 
B) A permanent tax liability 
C) A permanent tax asset 
D) A deferred tax liability

Question 6

Deferred Tax balances are discounted when their underlying temporary differences are material or are expected to reverse out many years into the future.

Accepted Answer

A) True 
 B)False

Question 7

A deductible amount is exemplified by all of the following except:

Accepted Answer

A) Revenue that is included in the tax return before it is included in pre-tax accounting income. 
B) Gain that is included in the tax return before it is included in pre-tax accounting income. 
C) Loss that is included in the tax return after it is included in pre-tax accounting income. 
D) Expense that is included in the tax return after it is included in pre-tax accounting income. 
E) Expense that is included in the tax return before it is included in pre-tax accounting income. 
A) Revenue that is included in the tax return before it is included in pre-tax accounting income. 
B) Gain that is included in the tax return before it is included in pre-tax accounting income. 
C) Loss that is included in the tax return after it is included in pre-tax accounting income. 
D) Expense that is included in the tax return after it is included in pre-tax accounting income. 
E) Expense that is included in the tax return before it is included in pre-tax accounting income.

Question 8

Explain the income tax disclosures required under ASPE.

Accepted Answer

i)If the Taxes Payable Method is being u

Question 9

On January 1, Year 2, GHI Inc.had spent $100,000 in capital development costs to date, 50% of which had been capitalized.During Year 2, the company had incurred additional capital development costs of $200,000, 60% of which was capitalized.The income tax rate for Years 2 and prior was 20%.The tax rate for future years was expected to be 25%.This rate was enacted during Year 2.For Year 2, the temporary differences arising from the above would result in:

Accepted Answer

A) a decrease to income tax expense of $40,000.A corresponding DTA of $60,000 would also be recorded as the end of Year 2. 
B) a decrease to income tax expense of $55,000.A corresponding DTA of $75,000 would also be recorded as the end of Year 2. 
C) an increase to income tax expense of $40,000.A corresponding DTL of $60,000 would also be recorded as the end of Year 2. 
D) an increase to income tax expense of $55,000.A corresponding DTL of $75,000 would also be recorded as the end of Year 2. 
A) a decrease to income tax expense of $40,000.A corresponding DTA of $60,000 would also be recorded as the end of Year 2. 
B) a decrease to income tax expense of $55,000.A corresponding DTA of $75,000 would also be recorded as the end of Year 2. 
C) an increase to income tax expense of $40,000.A corresponding DTL of $60,000 would also be recorded as the end of Year 2. 
D) an increase to income tax expense of $55,000.A corresponding DTL of $75,000 would also be recorded as the end of Year 2.

Question 10

Golf dues paid for by a company are:

Accepted Answer

A) a timing difference 
B) a reversing difference 
C) a temporary difference 
D) a permanent difference 
A) a timing difference 
B) a reversing difference 
C) a temporary difference 
D) a permanent difference

Question 11

What is inter-period tax allocation?

Accepted Answer

Inter-period tax allocation is the proce

Question 12

ABC Inc.purchased new machinery for $2 million on January 1st, 2014.For accounting purposes, the company depreciates all machinery on a straight-line basis (no salvage value)over a five year period.For tax purposes, CCA on all machinery is taken at a rate of 20%, with half a year's CCA taken in the year of acquisition.The tax rate for 2014 is 40%.The tax rate for years 2015 and later is 35%.Assume that all rates are enacted in the year to which they pertain.Using the shortcut approach, determine the deferred income tax asset or liability at the end of 2014.How (if at all)would your answer change if the tax rate for all years 2014 and beyond were enacted in 2014?

Accepted Answer

In this case, the tax rates for years 20

Question 13

All temporary differences originate, then reverse, and eventually end with a zero net effect.

Accepted Answer

A) True 
 B)False

Question 14

JMR Corporation has one asset worth $350,000.Depreciation accumulated to date is $230,000 and accumulated CCA is $200,000.Assuming the effective tax rate is constant at 40%, this will result in:

Accepted Answer

A) A Deferred income tax liability of $12,000 
B) A Deferred income tax asset of $30,000 
C) A Deferred income tax asset of $12,000 
D) A Deferred income tax liability of $30,000 
A) A Deferred income tax liability of $12,000 
B) A Deferred income tax asset of $30,000 
C) A Deferred income tax asset of $12,000 
D) A Deferred income tax liability of $30,000

Question 15

A taxable amount is exemplified by:

Accepted Answer

A) Gain that is included in the tax return before it is included in pre-tax accounting income. 
B) Expense that is included in the tax return after it is included in pre-tax accounting income. 
C) Expense that is included in the tax return before it is included in pre-tax accounting income. 
D) Revenue that is included in the tax return before it is included in pre-tax accounting income. 
A) Gain that is included in the tax return before it is included in pre-tax accounting income. 
B) Expense that is included in the tax return after it is included in pre-tax accounting income. 
C) Expense that is included in the tax return before it is included in pre-tax accounting income. 
D) Revenue that is included in the tax return before it is included in pre-tax accounting income.

Question 16

ABC Inc.purchased new machinery for $2 million on January 1st, 2014.For accounting purposes, the company depreciates all machinery on a straight-line basis (no salvage value)over a five year period.For tax purposes, CCA on all machinery is taken at a rate of 20%, with half a year's CCA taken in the year of acquisition.The tax rate for 2014 is 40%.The tax rate for years 2015 and later is 35%.Assume that all rates are enacted in the year to which they pertain.Using the shortcut approach, determine the deferred income tax asset or liability at the end of 2014.

Accepted Answer

Tax Basis: $2,000,000 - 0.5*20%*$2,000,0

Question 17

Kate Corporation sold a truck resulting in a capital gain of $7,600.The amount to be reported for tax purposes is:

Accepted Answer

A) $0 
B) $3,800 
C) $7,600 
D) $5,700 
A) $0 
B) $3,800 
C) $7,600 
D) $5,700

Question 18

EGR Company provided you with the following information:
2013 Net Income: $1,500,000 2014 Net Income: $900,000 2013 Tax rate: 40%
2014 Tax rate: 35%
In addition, the only difference between accounting and tax are warranty costs accrued of $100,000 i 2013.No actual warranty expenses were incurred in 2013 or 2014.Prepare journal entries for 2013 and 2014 to record income tax expense.

Accepted Answer

The answer of EGR Company provided you with the following...

Question 19

Which of the following is an example of a temporary difference, which could result in a deferred tax asset?

Accepted Answer

A) Use of straight-line depreciation for accounting purposes and an accelerated rate for income tax purposes 
B) Prepayments of expenses in year of payment; recognition of expense for accounting purposes occurs in a later year. 
C) Gain on disposal of an asset when included in taxable income before it is included in pre-tax accounting income 
D) Gross margin on instalment sales is recognized for accounting purposes before it is included in taxable income in the income tax return 
A) Use of straight-line depreciation for accounting purposes and an accelerated rate for income tax purposes 
B) Prepayments of expenses in year of payment; recognition of expense for accounting purposes occurs in a later year. 
C) Gain on disposal of an asset when included in taxable income before it is included in pre-tax accounting income 
D) Gross margin on instalment sales is recognized for accounting purposes before it is included in taxable income in the income tax return

Question 20

Recommended disclosures for the provision for income tax expense include all of the following except:

Accepted Answer

A) Income tax expense should not be grouped with other expenses 
B) Public companies should disclose the nature of temporary differences 
C) Income tax expense or benefit should be reported separately on the financial statements 
D) Income taxes relating to discontinued items must be disclosed separately on the financial statements 
A) Income tax expense should not be grouped with other expenses 
B) Public companies should disclose the nature of temporary differences 
C) Income tax expense or benefit should be reported separately on the financial statements 
D) Income taxes relating to discontinued items must be disclosed separately on the financial statements

The general terminology used to describe income tax expense when shown on the statement of comprehensive income is:

Temporary differences relate only to items that will be recognized on both the income statement and the tax return, but in different reporting periods.

A temporary difference that is deductible in future years is called:

Deferred Tax balances are discounted when their underlying temporary differences are material or are expected to reverse out many years into the future.

A deductible amount is exemplified by all of the following except:

Explain the income tax disclosures required under ASPE.

Golf dues paid for by a company are:

What is inter-period tax allocation?

All temporary differences originate, then reverse, and eventually end with a zero net effect.

JMR Corporation has one asset worth $350,000.Depreciation accumulated to date is $230,000 and accumulated CCA is $200,000.Assuming the effective tax rate is constant at 40%, this will result in:

A taxable amount is exemplified by:

Kate Corporation sold a truck resulting in a capital gain of $7,600.The amount to be reported for tax purposes is:

Which of the following is an example of a temporary difference, which could result in a deferred tax asset?

Recommended disclosures for the provision for income tax expense include all of the following except:

Financial Liabilities and Provisions

Financial Instruments: Long-Term Debt

Shareholders Equity

Financial Instruments: Complex Debt and Equity

Tax Losses

Leases

Post-Employment Benefits

Earnings Per Share

Accounting Changes

Financial Statement Analysis

Filters

Exam 16: Corporate Income Tax

The general terminology used to describe income tax expense when shown on the statement of comprehensive income is:

Temporary differences relate only to items that will be recognized on both the income statement and the tax return, but in different reporting periods.

A temporary difference that is deductible in future years is called:

Deferred Tax balances are discounted when their underlying temporary differences are material or are expected to reverse out many years into the future.

A deductible amount is exemplified by all of the following except:

Explain the income tax disclosures required under ASPE.

Golf dues paid for by a company are:

What is inter-period tax allocation?

All temporary differences originate, then reverse, and eventually end with a zero net effect.

JMR Corporation has one asset worth $350,000.Depreciation accumulated to date is $230,000 and accumulated CCA is $200,000.Assuming the effective tax rate is constant at 40%, this will result in:

A taxable amount is exemplified by:

Kate Corporation sold a truck resulting in a capital gain of $7,600.The amount to be reported for tax purposes is:

Which of the following is an example of a temporary difference, which could result in a deferred tax asset?

Recommended disclosures for the provision for income tax expense include all of the following except:

Financial Liabilities and Provisions

Financial Instruments: Long-Term Debt

Shareholders Equity

Financial Instruments: Complex Debt and Equity

Tax Losses

Leases

Post-Employment Benefits

Earnings Per Share

Accounting Changes

Financial Statement Analysis

Filters