Question 1

What term is used to describe an amount that will eventually be tax deductible?

Accepted Answer

A Deferred

Question 2

What term is used to describe an amount that will eventually be taxable?

Accepted Answer

A Deferred

Question 3

EGR Corporation has one asset worth $450,000.Accumulated Depreciation to date is $190,000 and accumulated CCA is $220,000.The Corporation also recorded warranty expense of $30,000.To date no customers have required warranty service, so no warranty expenditures have been made.Assuming the tax rate is constant at 40%, this will result in:

Accepted Answer

A) A net deferred income tax asset of $12,000 
B) A net deferred income tax liability of $12,000 
C) A net deferred income tax asset of $30,000 
D) No temporary difference. 
A) A net deferred income tax asset of $12,000 
B) A net deferred income tax liability of $12,000 
C) A net deferred income tax asset of $30,000 
D) No temporary difference.

Question 4

Temporary differences very seldom reverse (i.e., turnaround)in one or more future reporting periods.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is an example of a temporary difference which would not result in a deferred tax asset?

Accepted Answer

A) Unrealized loss on short term investment is recognized for accounting purposes during the holding period while the actual loss on date of disposal is used for tax purposes. 
B) Use of sales method of revenue recognition for accounting purposes, and instalment method of revenue recognition for tax purposes. 
C) Estimated loss on disposal of a segment of a business recognized for accounting purposes but reported on the income tax return later on the basis of the actual loss. 
D) Allowance method for doubtful accounts is used for accounting purposes while direct write-off is required for tax purposes. 
A) Unrealized loss on short term investment is recognized for accounting purposes during the holding period while the actual loss on date of disposal is used for tax purposes. 
B) Use of sales method of revenue recognition for accounting purposes, and instalment method of revenue recognition for tax purposes. 
C) Estimated loss on disposal of a segment of a business recognized for accounting purposes but reported on the income tax return later on the basis of the actual loss. 
D) Allowance method for doubtful accounts is used for accounting purposes while direct write-off is required for tax purposes.

Question 6

GFH had pre-tax accounting income of $1,400 during 2015.GFH used accelerated depreciation for tax purposes ($1,000)and straight-line depreciation for financial accounting purposes ($200).During 2015 GFH accrued warranty expenses of $900 and paid cash to honour warranties of $500.GFH's taxable income for 2015 would be:

Accepted Answer

A) $1,800 
B) $200 
C) $1,000 
D) $2,600 
A) $1,800 
B) $200 
C) $1,000 
D) $2,600

Question 7

During 20014, JBC had pre-tax accounting income of $8,400, originating taxable amounts of $4,800 and originating deductible amounts of $2,400.Calculate JBC's taxable income for 2014.

Accepted Answer

$5,000 + $4,000 - $2

Question 8

JMR Corporation has income before tax of $500,000.Included in this amount are meals and entertainment amounting to $10,000, warranty costs of $80,000 ($20,000 in warranty claims), depreciation $78,000 and dividends from a taxable Canadian Corporation of $20,000.CCA for the year amounted to $90,000.Calculate taxable income.

Accepted Answer

Taxable income: $500

Question 9

Netting of deferred income tax assets and liabilities is always forbidden under IFRS and ASPE.

Accepted Answer

A) True 
 B)False

Question 10

Briefly explain the three basic issues with respect to inter-period income tax allocation.

Accepted Answer

1.Extent of Allocation: There are discus

Question 11

Permanent differences are those that factor into the computation of both net income and taxable income.

Accepted Answer

A) True 
 B)False

Question 12

The following information is available to you: Income before tax; $80,000; depreciation, $15,000; CCA, $13,500; tax rate, 44%.Calculate the Deferred income tax asset (liability).

Accepted Answer

temporary

Question 13

KER commenced operations in 2013.The company has 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? Assume a 20% tax rate for both years.

Accepted Answer

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

Question 14

Comprehensive allocation recognizes the amount of taxes assessed in each year as the income tax expense for that year.

Accepted Answer

A) True 
 B)False

Question 15

A firm reported the following in its income statement for the current year: depreciation expense, $4,000; pollution violation fine, $12,000; pre-tax accounting income, $10,000.The tax rate is 40%.For tax purposes, the CCA deduction was $9,000.What amount of CURRENT income tax expense will be recognized for this year?

Accepted Answer

A) $8,800 
B) $400 
C) $7,800 
D) $4,000 
E) $6,800 
A) $8,800 
B) $400 
C) $7,800 
D) $4,000 
E) $6,800

Question 16

A characteristic of the taxes payable method is that:

Accepted Answer

A) It is mandatory for private companies. 
B) Tax owed for the period will equal accounting income tax expense. 
C) The matching principle is respected. 
D) Inter-period income tax allocation is applied to some types of temporary differences but not all. 
A) It is mandatory for private companies. 
B) Tax owed for the period will equal accounting income tax expense. 
C) The matching principle is respected. 
D) Inter-period income tax allocation is applied to some types of temporary differences but not all.

Question 17

ABC Inc.owns a single capital asset.At the end of its first year, the asset`s UCC is higher than its book value due to the company`s choice of depreciation methods.What will be the effect of this difference over the life of the asset, assuming that this trend continues?

Accepted Answer

A) This will result in a reduction of the initial Deferred Tax Liability, and a corresponding Deferred Income Tax Expense amount on the Statement of Comprehensive Income in each year. 
B) This will result in a reduction of the initial Deferred Tax Asset, and a corresponding Deferred Income Tax Benefit amount on the Statement of Comprehensive Income in each year. 
C) This will result in a reduction of the initial Deferred Tax Asset, and a corresponding Deferred Income Tax Expense amount on the Statement of Comprehensive Income in each year. 
D) This will result in a reduction of the initial Deferred Tax Liability, and a corresponding Deferred Income Tax Benefit amount on the Statement of Comprehensive Income in each year. 
A) This will result in a reduction of the initial Deferred Tax Liability, and a corresponding Deferred Income Tax Expense amount on the Statement of Comprehensive Income in each year. 
B) This will result in a reduction of the initial Deferred Tax Asset, and a corresponding Deferred Income Tax Benefit amount on the Statement of Comprehensive Income in each year. 
C) This will result in a reduction of the initial Deferred Tax Asset, and a corresponding Deferred Income Tax Expense amount on the Statement of Comprehensive Income in each year. 
D) This will result in a reduction of the initial Deferred Tax Liability, and a corresponding Deferred Income Tax Benefit amount on the Statement of Comprehensive Income in each year.

Question 18

At most, how many deferred tax accounts will a firm report in its balance sheet?

Accepted Answer

A) 2 
B) 4 
C) 3 
D) 1 
A) 2 
B) 4 
C) 3 
D) 1

Question 19

KG Company had capital assets with a carrying value of $1,670,000 and a tax value of $1,560,000.In addition they had an accrued warranty liability of $80,000 of which $20,000 had actually been incurred and golf club dues in the amount of $3,000.Calculate the temporary difference deductible (taxable).

Accepted Answer

Temporary taxable di

Question 20

Amanda Company sold an asset and as a result had a capital gain of $15,000.Fifty percent of this amount represents a permanent difference.

Accepted Answer

A) True 
 B)False

What term is used to describe an amount that will eventually be tax deductible?

What term is used to describe an amount that will eventually be taxable?

Temporary differences very seldom reverse (i.e., turnaround)in one or more future reporting periods.

Which of the following is an example of a temporary difference which would not result in a deferred tax asset?

During 20014, JBC had pre-tax accounting income of $8,400, originating taxable amounts of $4,800 and originating deductible amounts of $2,400.Calculate JBC's taxable income for 2014.

Netting of deferred income tax assets and liabilities is always forbidden under IFRS and ASPE.

Briefly explain the three basic issues with respect to inter-period income tax allocation.

Permanent differences are those that factor into the computation of both net income and taxable income.

The following information is available to you: Income before tax; $80,000; depreciation, $15,000; CCA, $13,500; tax rate, 44%.Calculate the Deferred income tax asset (liability).

Comprehensive allocation recognizes the amount of taxes assessed in each year as the income tax expense for that year.

A characteristic of the taxes payable method is that:

ABC Inc.owns a single capital asset.At the end of its first year, the asset`s UCC is higher than its book value due to the company`s choice of depreciation methods.What will be the effect of this difference over the life of the asset, assuming that this trend continues?

At most, how many deferred tax accounts will a firm report in its balance sheet?

Amanda Company sold an asset and as a result had a capital gain of $15,000.Fifty percent of this amount represents a permanent difference.

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

What term is used to describe an amount that will eventually be tax deductible?

What term is used to describe an amount that will eventually be taxable?

Temporary differences very seldom reverse (i.e., turnaround)in one or more future reporting periods.

Which of the following is an example of a temporary difference which would not result in a deferred tax asset?

During 20014, JBC had pre-tax accounting income of $8,400, originating taxable amounts of $4,800 and originating deductible amounts of $2,400.Calculate JBC's taxable income for 2014.

Netting of deferred income tax assets and liabilities is always forbidden under IFRS and ASPE.

Briefly explain the three basic issues with respect to inter-period income tax allocation.

Permanent differences are those that factor into the computation of both net income and taxable income.

The following information is available to you: Income before tax; $80,000; depreciation, $15,000; CCA, $13,500; tax rate, 44%.Calculate the Deferred income tax asset (liability).

Comprehensive allocation recognizes the amount of taxes assessed in each year as the income tax expense for that year.

A characteristic of the taxes payable method is that:

ABC Inc.owns a single capital asset.At the end of its first year, the asset`s UCC is higher than its book value due to the company`s choice of depreciation methods.What will be the effect of this difference over the life of the asset, assuming that this trend continues?

At most, how many deferred tax accounts will a firm report in its balance sheet?

Amanda Company sold an asset and as a result had a capital gain of $15,000.Fifty percent of this amount represents a permanent difference.

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