Question 1

Which of the following items is not a permanent book-tax difference?

Accepted Answer

A)  Tax-exempt life insurance proceeds. 
B)  Nondeductible meals expense. 
C)  Accrued vacation pay liability not paid within the first two and a half months of the next tax year. 
D)  Excess tax benefits from the exercise of NQOs. 
A)  Tax-exempt life insurance proceeds. 
B)  Nondeductible meals expense. 
C)  Accrued vacation pay liability not paid within the first two and a half months of the next tax year. 
D)  Excess tax benefits from the exercise of NQOs.

Question 2

Lafayette, Incorporated, completed its first year of operations with a pretax loss of $800,000. The tax return showed a net operating loss of $750,000. The $50,000 book-tax difference results from a disallowed deduction forbusiness-related meals. 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.

Accepted Answer

The disallowed business-relate

Question 3

Which of the following book-tax basis differences results in a deductible temporary difference?

Accepted Answer

A)  Book basis of an employee's postretirement benefits liability exceeds its tax basis. 
B)  Book basis of a building exceeds the tax basis of the building. 
C)  Book basis of an acquired intangible exceeds the tax basis of the intangible. 
D)  Tax basis of a prepaid liability exceeds the book basis of the liability. 
A)  Book basis of an employee's postretirement benefits liability exceeds its tax basis. 
B)  Book basis of a building exceeds the tax basis of the building. 
C)  Book basis of an acquired intangible exceeds the tax basis of the intangible. 
D)  Tax basis of a prepaid liability exceeds the book basis of the liability.

Question 4

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?

Accepted Answer

A)  More likely than not. 
B)  Reasonable basis. 
C)  Substantial authority. 
D)  Probable. 
A)  More likely than not. 
B)  Reasonable basis. 
C)  Substantial authority. 
D)  Probable.

Question 5

Sparrow Corporation reported pretax book income of $5,050,000. During the current year, the reserve for warranties increased by $303,000. In addition, tax depreciation exceeded book depreciation by $404,000. Finally, Sparrow received $51,000 of tax-exempt interest from municipal bonds. Compute Sparrow's current income tax expense or benefit.

Accepted Answer

${{[a(6)]:

Question 6

Lynch Company had a net deferred tax asset of $68,000 at the beginning of the year, representing a net taxable deductible difference of $200,000 (taxed at 34 percent). During the year, Lynch reported pretax book income of $800,000. Included in the computation were favorable temporary differences of $20,000 and unfavorable temporary differences of $50,000. At the beginning of the year, Congress reduced the corporate tax rate to 21 percent. Lynch's deferred income tax expense or benefit for the current year would be:

Accepted Answer

A)  Net deferred tax benefit of $6,300. 
B)  Net deferred tax expense of $6,300. 
C)  Net deferred tax benefit of $32,300. 
D)  Net deferred tax expense of $19,700. 
A)  Net deferred tax benefit of $6,300. 
B)  Net deferred tax expense of $6,300. 
C)  Net deferred tax benefit of $32,300. 
D)  Net deferred tax expense of $19,700.

Question 7

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?

Accepted Answer

Net deferred tax assets of $800,000 and

Question 8

A corporation's effective tax rate as computed in its income tax note is the company's cash tax rate for the year.

Accepted Answer

A) True 
 B)False

Question 9

Purple Rose Corporation reported pretax book income of $505,000. Tax depreciation exceeded book depreciation by $300,300. In addition, the company received $255,000 of tax-exempt life insurance proceeds. The prior-year tax return showed taxable income of $100,100. Compute Purple Rose's current income tax expense or benefit.

Accepted Answer

${{[a(6)]:

Question 10

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:

Accepted Answer

A)  $140,700 tax expense. 
B)  $123,600 tax benefit. 
C)  $121,800 tax expense. 
D)  $105,000 tax benefit. 
A)  $140,700 tax expense. 
B)  $123,600 tax benefit. 
C)  $121,800 tax expense. 
D)  $105,000 tax benefit.

Question 11

Weber Corporation reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $100,000, unfavorable temporary differences of $300,000, and unfavorable permanent differences of $200,000. Compute the company's book equivalent of taxable income. Use this number to compute the company's total income tax provision or benefit.

Accepted Answer

BETI of $600,000 and a total i

Question 12

Potential interest and penalties that would be assessed on a disallowed unrecognized tax benefit must be recorded in a company's income tax expense under ASC 740.

Accepted Answer

A) True 
 B)False

Question 13

Purple Rose Corporation reported pretax book income of $500,000. Tax depreciation exceeded book depreciation by $300,000. In addition, the company received $250,000 of tax-exempt life insurance proceeds. The prior-year tax return showed taxable income of $100,000. Compute Purple Rose's current income tax expense or benefit.

Accepted Answer

$10,500 cu

Question 14

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

Accepted Answer

A)  ASC 740 requires a company to disclose the amount of unrecognized tax benefits for each country in which it files a tax return. 
B)  ASC 740 requires a company to disclose the aggregate amount of unrecognized tax benefits, separated between U.S., state and local, and international tax positions. 
C)  ASC 740 requires a company to disclose the aggregate amount of unrecognized tax benefits without separation between U.S., state and local, and international tax positions. 
D)  None of the choices are correct. 
A)  ASC 740 requires a company to disclose the amount of unrecognized tax benefits for each country in which it files a tax return. 
B)  ASC 740 requires a company to disclose the aggregate amount of unrecognized tax benefits, separated between U.S., state and local, and international tax positions. 
C)  ASC 740 requires a company to disclose the aggregate amount of unrecognized tax benefits without separation between U.S., state and local, and international tax positions. 
D)  None of the choices are correct.

Question 15

Which of the following items does not result in a permanent difference?

Accepted Answer

A)  Accelerated tax depreciation in excess of straight-line book depreciation. 
B)  Interest income from a tax-exempt municipal bond. 
C)  Dividends received deduction on the income tax return. 
D)  Excess tax benefits from the exercise of an NQO. 
A)  Accelerated tax depreciation in excess of straight-line book depreciation. 
B)  Interest income from a tax-exempt municipal bond. 
C)  Dividends received deduction on the income tax return. 
D)  Excess tax benefits from the exercise of an NQO.

Question 16

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?

Accepted Answer

$0.
Acai cannot record any tax

Question 17

Abbot Corporation reported pretax book income of $500,000. During the current year, the reserve for bad debts increased by $5,000. In addition, tax depreciation exceeded book depreciation by $40,000. Finally, Abbot received $3,000 of tax-exempt life insurance proceeds from the death of one of its officers. Abbot's current income tax expense or benefit would be:

Accepted Answer

A)  $105,000. 
B)  $104,370. 
C)  $97,650. 
D)  $97,020. 
A)  $105,000. 
B)  $104,370. 
C)  $97,650. 
D)  $97,020.

Question 18

Which of the following statements best describes the objective(s) of ASC 740?

Accepted Answer

A)  To compute a corporation's current income tax liability or benefit. 
B)  To recognize deferred tax liabilities and assets. 
C)  To report permanent differences in the balance sheet. 
D)  To both compute a corporation's current income tax liability or benefit and to recognize deferred tax liabilities and assets. 
A)  To compute a corporation's current income tax liability or benefit. 
B)  To recognize deferred tax liabilities and assets. 
C)  To report permanent differences in the balance sheet. 
D)  To both compute a corporation's current income tax liability or benefit and to recognize deferred tax liabilities and assets.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

A cumulative financial accounting (book) loss over three years (36 consecutive months) likely would be considered significant negative evidence in a valuation allowance analysis.

Accepted Answer

A) True 
 B)False

Which of the following items is not a permanent book-tax difference?

Which of the following book-tax basis differences results in a deductible temporary 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?

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?

A corporation's effective tax rate as computed in its income tax note is the company's cash tax rate for the year.

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:

Potential interest and penalties that would be assessed on a disallowed unrecognized tax benefit must be recorded in a company's income tax expense under ASC 740.

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

Which of the following items does not result in a permanent difference?

Which of the following statements best describes the objective(s) of ASC 740?

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

A cumulative financial accounting (book) loss over three years (36 consecutive months) likely would be considered significant negative evidence in a valuation allowance analysis.

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Business Entities Overview

Corporate Operations

Corporate Taxation: Non-Liquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters

Exam 6: Accounting for Income Taxes

Which of the following items is not a permanent book-tax difference?

Which of the following book-tax basis differences results in a deductible temporary 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?

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?

A corporation's effective tax rate as computed in its income tax note is the company's cash tax rate for the year.

Potential interest and penalties that would be assessed on a disallowed unrecognized tax benefit must be recorded in a company's income tax expense under ASC 740.

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

Which of the following items does not result in a permanent difference?

Which of the following statements best describes the objective(s) of ASC 740?

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

A cumulative financial accounting (book) loss over three years (36 consecutive months) likely would be considered significant negative evidence in a valuation allowance analysis.

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Business Entities Overview

Corporate Operations

Corporate Taxation: Non-Liquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The Us Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

Filters