Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements concerning the classification of deferred tax assets and liabilities is true?

Accepted Answer

A)  A deferred tax asset is classified as noncurrent only if the company expects the future tax benefit to be received more than 12 months from the balance sheet date. 
B)  All deferred tax assets and liabilities are treated as noncurrent. 
C)  A deferred tax asset related to a bad debt reserve is classified as current if the related accounts receivable is classified as a current asset. 
D)  A deferred tax asset related to inventory capitalization is classified as noncurrent only if the company uses a FIFO accounting method and the inventory to which the deferred tax asset relates will not be treated as sold within 12 months from the balance sheet date. 
A)  A deferred tax asset is classified as noncurrent only if the company expects the future tax benefit to be received more than 12 months from the balance sheet date. 
B)  All deferred tax assets and liabilities are treated as noncurrent. 
C)  A deferred tax asset related to a bad debt reserve is classified as current if the related accounts receivable is classified as a current asset. 
D)  A deferred tax asset related to inventory capitalization is classified as noncurrent only if the company uses a FIFO accounting method and the inventory to which the deferred tax asset relates will not be treated as sold within 12 months from the balance sheet date.

Question 3

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 4

Milton Corporation reported pretax book income of $2,500,000. Included in the computation were favorable temporary differences of $400,000, unfavorable temporary differences of $150,000, and favorable permanent differences of $100,000. Compute Milton's deferred income tax expense or benefit.

Accepted Answer

$52,500 deferred income tax ex

Question 5

The Emerging Issues Task Force assists the FASB by providing guidance on the implementation of ASC 740 and other accounting pronouncements.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Jones Company reported pretax book income of $409,000. Included in the computation were favorable temporary differences of $50,900, unfavorable temporary differences of $20,450, and favorable permanent differences of $40,450. Book equivalent of taxable income is:

Accepted Answer

A)  $449,450. 
B)  $409,000. 
C)  $368,550. 
D)  $337,650. 
A)  $449,450. 
B)  $409,000. 
C)  $368,550. 
D)  $337,650.

Question 8

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 9

Weaver Company had a net deferred tax liability of $34,000 at the beginning of the year, representing a net taxable temporary difference of $100,000 (taxed at 34 percent). During the year, Weaver reported pretax book income of $400,000. Included in the computation were unfavorable temporary differences of $50,000 and favorable temporary differences of $20,000. At the beginning of the year, Congress reduced the corporate tax rate to 21 percent. Weaver'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 $19,300. 
D)  Net deferred tax expense of $19,300. 
A)  Net deferred tax benefit of $6,300. 
B)  Net deferred tax expense of $6,300. 
C)  Net deferred tax benefit of $19,300. 
D)  Net deferred tax expense of $19,300.

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

The focus of ASC 740 is on the income statement.

Accepted Answer

A) True 
 B)False

Question 12

Sparrow Corporation reported pretax book income of $5,000,000. During the current year, the reserve for warranties increased by $300,000. In addition, tax depreciation exceeded book depreciation by $400,000. Finally, Sparrow received $50,000 of tax-exempt interest from municipal bonds. Compute Sparrow's current income tax expense or benefit.

Accepted Answer

$1,018,500

Question 13

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 14

A valuation allowance can reduce both a deferred tax asset and a deferred tax liability.

Accepted Answer

A) True 
 B)False

Question 15

Jones 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. Book equivalent of taxable income is:

Accepted Answer

A)  $440,000. 
B)  $400,000. 
C)  $360,000. 
D)  $330,000. 
A)  $440,000. 
B)  $400,000. 
C)  $360,000. 
D)  $330,000.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

TarHeel Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $100,000. In addition, tax depreciation exceeded book depreciation by $200,000. Finally, TarHeel subtracted a dividends received deduction of $50,000 in computing its current-year taxable income. TarHeel's accounting effective tax rate is:

Accepted Answer

A)  21 percent. 
B)  19.95 percent. 
C)  18.9 percent. 
D)  17.85 percent. 
A)  21 percent. 
B)  19.95 percent. 
C)  18.9 percent. 
D)  17.85 percent.

Question 18

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.

Question 19

Which of the following statements best describes a valuation allowance as it relates to accounting for income taxes?

Accepted Answer

A)  A valuation allowance is a contra account to deferred tax assets only. 
B)  A valuation allowance is a contra account to deferred tax liabilities only. 
C)  A valuation allowance is a contra account to deferred tax assets and liabilities. 
D)  A valuation allowance is a contra account to noncurrent deferred tax assets only. 
A)  A valuation allowance is a contra account to deferred tax assets only. 
B)  A valuation allowance is a contra account to deferred tax liabilities only. 
C)  A valuation allowance is a contra account to deferred tax assets and liabilities. 
D)  A valuation allowance is a contra account to noncurrent deferred tax assets only.

Question 20

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

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 statements concerning the classification of deferred tax assets and liabilities is true?

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

Milton Corporation reported pretax book income of $2,500,000. Included in the computation were favorable temporary differences of $400,000, unfavorable temporary differences of $150,000, and favorable permanent differences of $100,000. Compute Milton's deferred income tax expense or benefit.

The Emerging Issues Task Force assists the FASB by providing guidance on the implementation of ASC 740 and other accounting pronouncements.

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

Jones Company reported pretax book income of $409,000. Included in the computation were favorable temporary differences of $50,900, unfavorable temporary differences of $20,450, and favorable permanent differences of $40,450. Book equivalent of taxable income is:

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:

The focus of ASC 740 is on the income statement.

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

A valuation allowance can reduce both a deferred tax asset and a deferred tax liability.

Jones 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. Book equivalent of taxable income is:

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

Which of the following statements best describes a valuation allowance as it relates to accounting for income taxes?

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 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 statements concerning the classification of deferred tax assets and liabilities is true?

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

Milton Corporation reported pretax book income of $2,500,000. Included in the computation were favorable temporary differences of $400,000, unfavorable temporary differences of $150,000, and favorable permanent differences of $100,000. Compute Milton's deferred income tax expense or benefit.

The Emerging Issues Task Force assists the FASB by providing guidance on the implementation of ASC 740 and other accounting pronouncements.

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

Jones Company reported pretax book income of $409,000. Included in the computation were favorable temporary differences of $50,900, unfavorable temporary differences of $20,450, and favorable permanent differences of $40,450. Book equivalent of taxable income is:

The focus of ASC 740 is on the income statement.

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

A valuation allowance can reduce both a deferred tax asset and a deferred tax liability.

Jones 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. Book equivalent of taxable income is:

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

Which of the following statements best describes a valuation allowance as it relates to accounting for income taxes?

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