Exam 17: Accounting for Income Taxes

Irish Corporation reported pretax book income of $1,000,000. Included in the computation were favorable temporary differences of $300,000, unfavorable temporary differences of $100,000, and favorable permanent differences of $200,000. Compute Irish's book equivalent of taxable income. Use this number to compute the company's total income tax provision or benefit.

MAC, Incorporated, completed its first year of operations with a pretax loss of $300,000. The tax return showed a net operating loss of $500,000. The $200,000 book-tax difference results from excess tax depreciation over book depreciation. Management has determined that they should record a valuation allowance equal to the net deferred tax asset. Prepare the journal entries to record the deferred tax provision and the valuation allowance.

Which of the following statements is true?

Acai Corporation determined that $5,000,000 of its R&D credit on its current-year tax return was uncertain. Acai determined that there was a 40 percent chance of the credit being sustained on audit. Management made the following assessment of the company's potential tax benefit from the R&D credit and its probability of occurring. Under ASC 740, what amount of the tax benefit related to the R&D credit can Acai recognize in calculating its income tax provision in the current year?

Which of the following statements is true?

ASC 740 permits a corporation to net its deferred tax assets and deferred tax liabilities regardless of the jurisdiction in which they arise.

Which of the following temporary differences creates a deferred tax asset in the year in which it originates?

ASC 740 requires a publicly traded company to disclose the components of its deferred tax assets and liabilities only if the amounts are considered to be:

Jones Company reported pretax book income of $403,000. Included in the computation were favorable temporary differences of $50,300, unfavorable temporary differences of $20,150, and favorable permanent differences of $40,150. Book equivalent of taxable income is:

Which of the following items would likely not be included in the computation of a company's structural effective tax rate?

Tax-exempt interest from municipal bonds is an example of a permanent book-tax difference.

What confidence level must management have that a tax position will be sustained on audit before it can recognize any portion of the related deferred tax asset under ASC 740?

Which of the following statements best describes the disclosure of a company's deferred tax assets and liabilities?

Which of the following statements about uncertain tax position disclosures is false?

ASC 740 applies to accounting for state, local, and international income taxes as well as federal income taxes.

Moody Corporation recorded the following deferred tax assets and liabilities: What will be the balances in the deferred tax asset and deferred tax liability accounts on Moody Corporation's balance sheet?

As part of its uncertain tax position assessment, Madison Corporation records interest and penalties related to its unrecognized tax benefits of $1,000,000. Which of the following statements about recording this amount is most correct?

Packard Corporation reported pretax book income of $500,000. Included in the computation were favorable temporary differences of $10,000, unfavorable temporary differences of $100,000, and unfavorable permanent differences of $80,000. The corporation's current income tax expense or benefit would be:

Irish Corporation reported pretax book income of $1,011,000. Included in the computation were favorable temporary differences of $303,300, unfavorable temporary differences of $101,100, and favorable permanent differences of $202,200. Compute Irish's book equivalent of taxable income. Use this number to compute the company's total income tax provision or benefit.

A corporation evaluates the need for a valuation allowance by comparing both positive and negative evidence that the corporation will realize a deferred tax asset in the future.