Question 1

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:

Accepted Answer

A)  Material. 
B)  Significant. 
C)  Pertinent. 
D)  Important. 
A)  Material. 
B)  Significant. 
C)  Pertinent. 
D)  Important. B

Question 2

Which of the following statements is true?

Accepted Answer

A)  A change in capitalized inventory costs under §263A always produces an increase in a deferred tax asset. 
B)  A change in capitalized inventory costs under §263A always produces a decrease in a deferred tax asset. 
C)  A change in capitalized inventory costs under §263A can produce an increase or a decrease in a deferred tax asset. 
D)  A change in capitalized inventory costs under §263A always produces a permanent difference. 
A)  A change in capitalized inventory costs under §263A always produces an increase in a deferred tax asset. 
B)  A change in capitalized inventory costs under §263A always produces a decrease in a deferred tax asset. 
C)  A change in capitalized inventory costs under §263A can produce an increase or a decrease in a deferred tax asset. 
D)  A change in capitalized inventory costs under §263A always produces a permanent difference. C

Question 3

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  False

Question 4

A valuation allowance is recorded against a deferred tax asset when:

Accepted Answer

A)  It is probable that the deferred tax asset will not be realized in the future. 
B)  It is more likely than not that the deferred tax asset will not be realized in the future. 
C)  It is highly likely the deferred tax asset will not be realized in the future. 
D)  It is only remotely possible that the deferred tax asset will not be realized in the future. 
A)  It is probable that the deferred tax asset will not be realized in the future. 
B)  It is more likely than not that the deferred tax asset will not be realized in the future. 
C)  It is highly likely the deferred tax asset will not be realized in the future. 
D)  It is only remotely possible that the deferred tax asset will not be realized in the future.

Question 5

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 6

Tuna Corporation reported pretax book income of $1,005,000. During the current year, the net reserve for warranties increased by $27,500. In addition, book depreciation exceeded tax depreciation by $105,000. Finally, Tuna subtracted a dividends received deduction of $17,500 in computing its current-year taxable income. Book equivalent of taxable income is:

Accepted Answer

A)  $1,137,500. 
B)  $1,120,000. 
C)  $1,022,500. 
D)  $987,500. 
A)  $1,137,500. 
B)  $1,120,000. 
C)  $1,022,500. 
D)  $987,500.

Question 7

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 8

Smith Company reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000, unfavorable temporary differences of $20,000, and favorable permanent differences of $40,000. Smith's deferred income tax expense or benefit would be:

Accepted Answer

A)  Net deferred tax expense of $6,300. 
B)  Net deferred tax benefit of $6,300. 
C)  Net deferred tax expense of $14,700. 
D)  Net deferred tax benefit of $14,700. 
A)  Net deferred tax expense of $6,300. 
B)  Net deferred tax benefit of $6,300. 
C)  Net deferred tax expense of $14,700. 
D)  Net deferred tax benefit of $14,700.

Question 9

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.

Accepted Answer

A) True 
 B)False

Question 10

ASC 740 deals with accounting for uncertain tax positions.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Swordfish Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $25,000. In addition, book depreciation exceeded tax depreciation by $100,000. In prior years, tax depreciation exceeded book depreciation by a cumulative amount of $500,000. Finally, Swordfish subtracted a dividends received deduction of $15,000 in computing its current-year taxable income. Swordfish's deferred income tax expense or benefit would be:

Accepted Answer

A)  $23,100 net deferred tax expense. 
B)  $23,100 net deferred tax benefit. 
C)  $26,250 net deferred tax benefit. 
D)  $26,250 net deferred tax expense. 
A)  $23,100 net deferred tax expense. 
B)  $23,100 net deferred tax benefit. 
C)  $26,250 net deferred tax benefit. 
D)  $26,250 net deferred tax expense.

Question 13

Whitman Corporation reported pretax book income of $400,000. Book depreciation exceeded tax depreciation by $100,000. In addition, the company accrued vacation pay of $50,000 that was not deductible until paid in the next year. Whitman has a net operating loss carryforward of $200,000 from the prior year. Compute the company's deferred income tax expense or benefit for the current year.

Accepted Answer

$10,500 deferred income tax ex

Question 14

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 15

The tax effects of permanent differences generally are reported in a company's computation of its effective tax rate.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A)  Tax effects of international operations. 
B)  Tax effects of state and local operations. 
C)  Tax effects from the R&D credit. 
D)  Tax effects from goodwill impairment. 
A)  Tax effects of international operations. 
B)  Tax effects of state and local operations. 
C)  Tax effects from the R&D credit. 
D)  Tax effects from goodwill impairment.

Question 17

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 18

Which of the following statements is true?

Accepted Answer

A)  Another name for a taxable temporary difference is an unfavorable difference. 
B)  Another name for a taxable temporary difference is a favorable difference. 
C)  Another name for a deductible temporary difference is a favorable difference. 
D)  Another name for a deductible temporary difference is a permanent difference. 
A)  Another name for a taxable temporary difference is an unfavorable difference. 
B)  Another name for a taxable temporary difference is a favorable difference. 
C)  Another name for a deductible temporary difference is a favorable difference. 
D)  Another name for a deductible temporary difference is a permanent difference.

Question 19

Davison Company determined that the book basis of its net accounts receivable was less than the tax basis of its net accounts receivable by $800,000 due to a difference in the allowance for bad debts account. 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 20

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.

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:

Which of the following statements is true?

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

A valuation allowance is recorded against a deferred tax asset when:

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.

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:

Smith Company reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000, unfavorable temporary differences of $20,000, and favorable permanent differences of $40,000. Smith's deferred income tax expense or benefit would be:

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.

ASC 740 deals with accounting for uncertain tax positions.

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

The tax effects of permanent differences generally are reported in a company's computation of its effective tax rate.

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

Which of the following statements is true?

Davison Company determined that the book basis of its net accounts receivable was less than the tax basis of its net accounts receivable by $800,000 due to a difference in the allowance for bad debts account. This basis difference is characterized as:

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

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Exam 6: Accounting for Income Taxes

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:

Which of the following statements is true?

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

A valuation allowance is recorded against a deferred tax asset when:

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.

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:

Smith Company reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000, unfavorable temporary differences of $20,000, and favorable permanent differences of $40,000. Smith's deferred income tax expense or benefit would be:

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.

ASC 740 deals with accounting for uncertain tax positions.

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

The tax effects of permanent differences generally are reported in a company's computation of its effective tax rate.

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

Which of the following statements is true?

Davison Company determined that the book basis of its net accounts receivable was less than the tax basis of its net accounts receivable by $800,000 due to a difference in the allowance for bad debts account. This basis difference is characterized as:

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