Question 1

A corporation undertakes a valuation allowance analysis to determine if a deferred tax asset should be recognized on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 2

Smith Company reported pretax book income of $411,000. Included in the computation were favorable temporary differences of $52,200, unfavorable temporary differences of $21,100, and favorable permanent differences of $41,100. Smith's deferred income tax expense or benefit would be:

Accepted Answer

A)  Net deferred tax expense of $6,531. 
B)  Net deferred tax benefit of $6,531. 
C)  Net deferred tax expense of $15,393. 
D)  Net deferred tax benefit of $15,393. 
A)  Net deferred tax expense of $6,531. 
B)  Net deferred tax benefit of $6,531. 
C)  Net deferred tax expense of $15,393. 
D)  Net deferred tax benefit of $15,393.

Question 3

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.

Accepted Answer

BETI of $800,000, total income

Question 4

Grand River Corporation reported pretax book income of $570,000. Included in the computation were favorable temporary differences of $135,000, unfavorable temporary differences of $66,000, and favorable permanent differences of $122,000. The corporation's current income tax expense or benefit would be:

Accepted Answer

A)  $119,700 tax benefit. 
B)  $119,070 tax expense. 
C)  $105,210 tax benefit. 
D)  $79,590 tax expense. 
A)  $119,700 tax benefit. 
B)  $119,070 tax expense. 
C)  $105,210 tax benefit. 
D)  $79,590 tax expense.

Question 5

B-Line Company reported pretax net income from continuing operations of $1,001,000 and taxable income of $800,900. The favorable book-tax difference of $200,100 was due to a $100,100 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $50,100 due to accrued vacation pay, and a $150,100 favorable permanent difference from the dividends received deduction.
a. Compute B-Line's current income tax expense.
b. Compute B-Line's deferred income tax expense or benefit.
c. Compute B-Line's effective tax rate.
d. Provide a reconciliation of B-Line's effective tax rate with its hypothetical tax rate of 21 percent.

Accepted Answer

× 21% @#IMG-DLM& ^#${

Question 6

Whitman Corporation reported pretax book income of $417,000. Book depreciation exceeded tax depreciation by $101,700. In addition, the company accrued vacation pay of $58,500 that was not deductible until paid in the next year. Whitman has a net operating loss carryforward of $201,700 from the prior year. Compute the company's deferred income tax expense or benefit for the current year.

Accepted Answer

${{[a(6)]:#,###}} deferred inc

Question 7

DeWitt Corporation reported pretax book income of $800,000. Tax depreciation exceeded book depreciation by $400,000. In addition, the company received $100,000 of tax-exempt municipal bond interest. DeWitt used a net operating loss carryover of $200,000 to offset taxable income in the current year. Compute DeWitt's book equivalent of taxable income. Use this number to compute DeWitt's total income tax provision or benefit for the current year.

Accepted Answer

BETI of $700,000 and a total i

Question 8

Stone Corporation reported pretax book income of $1,009,000. Tax depreciation exceeded book depreciation by $300,900. In addition, the reserve for bad debts decreased by $54,500. Stone had a net deferred tax asset of $34,306 at the beginning of the year, representing a net deductible temporary difference of $100,900. At the beginning of the tax year, Congress reduced the corporate tax rate from 34 percent to 21 percent. Compute the company's current and deferred income tax expense or benefit.

Accepted Answer

${{[a(9)]:#,###}} current income tax exp

Question 9

Angel Corporation reported pretax book income of $1,022,000. During the current year, the net reserve for warranties increased by $28,300. In addition, tax depreciation exceeded book depreciation by $105,500. Finally, Angel subtracted a dividends received deduction of $29,400 in computing its current-year taxable income. Angel's hypothetical tax expense in its reconciliation of its income tax expense is:

Accepted Answer

A)  $214,620. 
B)  $208,677. 
C)  $198,408. 
D)  $192,465. 
A)  $214,620. 
B)  $208,677. 
C)  $198,408. 
D)  $192,465.

Question 10

Farm Corporation reported pretax book loss of $500,000. Tax depreciation exceeded book depreciation by $100,000. In addition, Farm received prepaid income of $50,000, which was included on its tax return but was not included in the book loss.Farm Corporation had taxable income of $750,000 in the prior year. Compute the company's income tax expense or benefit.

Accepted Answer

$105,000 net tax benefit. The components

Question 11

Which of the following statements is true with respect to a company's effective tax rate reconciliation?

Accepted Answer

A)  The hypothetical tax expense is the tax that would be due if the company's statutory tax rate were applied to the company's net income from continuing operations. 
B)  The hypothetical tax expense is the tax that would be due if the company's statutory tax rate were applied to the company's taxable income. 
C)  The hypothetical tax expense is the tax that would be due if the company's statutory tax rate were applied to the company's book equivalent of taxable income. 
D)  The hypothetical tax expense is another name for the company's effective tax rate. 
A)  The hypothetical tax expense is the tax that would be due if the company's statutory tax rate were applied to the company's net income from continuing operations. 
B)  The hypothetical tax expense is the tax that would be due if the company's statutory tax rate were applied to the company's taxable income. 
C)  The hypothetical tax expense is the tax that would be due if the company's statutory tax rate were applied to the company's book equivalent of taxable income. 
D)  The hypothetical tax expense is another name for the company's effective tax rate.

Question 12

Price Corporation reported pretax book income of $600,000. Tax depreciation exceeded book depreciation by $100,000. In addition, the reserve for warranties increased by $40,000. Price had a net deferred tax liability of $34,000 at the beginning of the year, representing a net taxable temporary difference of $100,000. At the beginning of the year, Congress reduced the corporate tax rate from 34 percent to 21 percent. Compute the company's current and deferred income tax expense or benefit.

Accepted Answer

$113,400 current income tax ex

Question 13

Frost Corporation reported pretax book income of $3,000,000. Included in the computation were favorable temporary differences of $200,000, unfavorable temporary differences of $350,000, and unfavorable permanent differences of $50,000. Compute Frost's deferred income tax expense or benefit.

Accepted Answer

$31,500 deferred income tax be

Question 14

Which of the following statements is true?

Accepted Answer

A)  ASC 740 focuses on the income tax expense or benefit on the income statement. 
B)  ASC 740 focuses on the balances in the deferred tax assets and liabilities on the balance sheet. 
C)  ASC 740 focuses on the income taxes paid or refunded in the statement of cash flows. 
D)  ASC 740 focuses on the computation of a company's effective tax rate in the income tax note to the financial statements. 
A)  ASC 740 focuses on the income tax expense or benefit on the income statement. 
B)  ASC 740 focuses on the balances in the deferred tax assets and liabilities on the balance sheet. 
C)  ASC 740 focuses on the income taxes paid or refunded in the statement of cash flows. 
D)  ASC 740 focuses on the computation of a company's effective tax rate in the income tax note to the financial statements.

Question 15

Which of the following best describes the focus of ASC 740?

Accepted Answer

A)  ASC 740 uses an "asset and liability approach" that focuses on the balance sheet. 
B)  ASC 740 uses an "income and expense approach" that focuses on the income statement. 
C)  ASC 740 uses a "taxes paid or refunded approach" that focuses on the statement of cash flows. 
D)  ASC 740 uses a "permanent differences approach" that focuses on the effective tax rate reported in the income tax note to the financial statements. 
A)  ASC 740 uses an "asset and liability approach" that focuses on the balance sheet. 
B)  ASC 740 uses an "income and expense approach" that focuses on the income statement. 
C)  ASC 740 uses a "taxes paid or refunded approach" that focuses on the statement of cash flows. 
D)  ASC 740 uses a "permanent differences approach" that focuses on the effective tax rate reported in the income tax note to the financial statements.

Question 16

Temporary differences create either a deferred tax asset or a deferred tax liability.

Accepted Answer

A) True 
 B)False

Question 17

Kedzie Company determined that the book basis of its liability for "other postretirement benefits" (OPEB) exceeded the tax basis of this account by $10,000,000. This basis difference is characterized as:

Accepted Answer

A)  Deductible temporary difference. 
B)  Taxable temporary difference. 
C)  Favorable permanent difference. 
D)  Unfavorable permanent difference. 
A)  Deductible temporary difference. 
B)  Taxable temporary difference. 
C)  Favorable permanent difference. 
D)  Unfavorable permanent difference.

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements is true?

Accepted Answer

A)  In determining if a valuation allowance is needed, positive evidence is considered more persuasive than negative evidence. 
B)  In determining if a valuation allowance is needed, negative evidence is considered more persuasive than positive evidence. 
C)  In determining if a valuation allowance is needed, negative and positive evidence must be evaluated equally. 
D)  In determining if a valuation allowance is needed, only negative evidence is evaluated. 
A)  In determining if a valuation allowance is needed, positive evidence is considered more persuasive than negative evidence. 
B)  In determining if a valuation allowance is needed, negative evidence is considered more persuasive than positive evidence. 
C)  In determining if a valuation allowance is needed, negative and positive evidence must be evaluated equally. 
D)  In determining if a valuation allowance is needed, only negative evidence is evaluated.

Question 20

TarHeel Corporation reported pretax book income of $1,006,000. During the current year, the net reserve for warranties increased by $100,300. In addition, tax depreciation exceeded book depreciation by $201,500. Finally, TarHeel subtracted a dividends received deduction of $51,200 in computing its current-year taxable income. TarHeel's accounting effective tax rate is:

Accepted Answer

A)  21.00 percent. 
B)  19.93 percent. 
C)  18.86 percent. 
D)  17.79 percent. 
A)  21.00 percent. 
B)  19.93 percent. 
C)  18.86 percent. 
D)  17.79 percent.

A corporation undertakes a valuation allowance analysis to determine if a deferred tax asset should be recognized on the balance sheet.

Smith Company reported pretax book income of $411,000. Included in the computation were favorable temporary differences of $52,200, unfavorable temporary differences of $21,100, and favorable permanent differences of $41,100. Smith's deferred income tax expense or benefit would be:

Which of the following statements is true with respect to a company's effective tax rate reconciliation?

Frost Corporation reported pretax book income of $3,000,000. Included in the computation were favorable temporary differences of $200,000, unfavorable temporary differences of $350,000, and unfavorable permanent differences of $50,000. Compute Frost's deferred income tax expense or benefit.

Which of the following statements is true?

Which of the following best describes the focus of ASC 740?

Temporary differences create either a deferred tax asset or a deferred tax liability.

Kedzie Company determined that the book basis of its liability for "other postretirement benefits" (OPEB) exceeded the tax basis of this account by $10,000,000. This basis difference is characterized as:

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

Which of the following statements is true?

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

A corporation undertakes a valuation allowance analysis to determine if a deferred tax asset should be recognized on the balance sheet.

Smith Company reported pretax book income of $411,000. Included in the computation were favorable temporary differences of $52,200, unfavorable temporary differences of $21,100, and favorable permanent differences of $41,100. Smith's deferred income tax expense or benefit would be:

Which of the following statements is true with respect to a company's effective tax rate reconciliation?

Frost Corporation reported pretax book income of $3,000,000. Included in the computation were favorable temporary differences of $200,000, unfavorable temporary differences of $350,000, and unfavorable permanent differences of $50,000. Compute Frost's deferred income tax expense or benefit.

Which of the following statements is true?

Which of the following best describes the focus of ASC 740?

Temporary differences create either a deferred tax asset or a deferred tax liability.

Kedzie Company determined that the book basis of its liability for "other postretirement benefits" (OPEB) exceeded the tax basis of this account by $10,000,000. This basis difference is characterized as:

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

Which of the following statements is true?

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