Exam 16: Accounting for Income Taxes

Which of the following circumstances creates a future taxable amount?

Use the following to answer questions For its first year of operations,Tringali Corporation's reconciliation of pretax accounting income to taxable income is as follows: Tringali's tax rate is 40%.Assume that no estimated taxes have been paid. -What should Tringali report as income tax payable for its first year of operations?

The tax effect of a net operating loss (NOL)carryback usually:

What should Hobson report as net income?

Ignoring operating expenses and additional sales in 2017,what deferred tax liability would Isaac report in its year-end 2017 balance sheet?

At the end of its first year of operations,Prince Charming Corporation had a current liability of $300,000 for unearned rent.This was the only difference between pretax accounting income and taxable income.Assume an income tax rate of 40%. Required: The tax liability from the tax return is $750,000.Prepare the journal entry to record income taxes for Prince Charming's first year of operations.Show well-labeled computations.

Pocus Inc.reports warranty expense when related products are sold.For tax purposes,the warranty costs are deductible as incurred.At the end of the current year,Pocus has a warranty liability of $500,000 and taxable income of $50,000,000.At the beginning of the current year,Pocus reported a deferred tax asset of $210,000 related to the difference in reporting warranty expense,its only temporary difference.The enacted tax rate is 40% each year. Required: Prepare the appropriate journal entry for Pocus to record the income tax provision for the current year.Show well-labeled computations to support the three amounts in your journal entry.

Which of the following creates a deferred tax liability?

What argument serves as the basis for the GAAP requirement that deferred taxes should be recognized for all temporary differences?

Use the following to answer questions In LMC's 2016 annual report to shareholders,it disclosed the following information about its income taxes: INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the amounts of assets and liabilities for accounting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of December 31 were as follows: -Will LMC report $819.9 million as a liability in its balance sheet at December 31,2016? Explain.

Use the following to answer question In its 2016 annual report to shareholders,Black Inc.disclosed the following information about income taxes. A reconciliation of income taxes computed at the United States federal statutory income tax rate (35%)to the provision (benefit)for income taxes reflected in the Consolidated Statement of Operations for the years ended December 31,2016,2015,2014,is as follows ($ in millions): The significant components of the net deferred tax assets at December 31,2016 and 2015,were as follows ($ in millions): -Estimate the effective tax rate for Black Inc.in 2016.Why is it different from the 35% federal statutory rate?

A deferred tax asset represents a:

Which of the following creates a deferred tax asset?

Theodore Enterprises had the following pretax income (loss)over its first three years of operations: For each year there were no deferred income taxes and the tax rate was 30%.In its 2015 tax return,Theodore elected a net operating loss carryback.No valuation account was deemed necessary for the deferred tax asset as of December 31,2015.What was Theodore's income tax expense for 2016?

What is a valuation allowance for deferred tax assets and when is it used?

For the current year ($ in millions),Centipede Corp.had $80 in pretax accounting income.This included warranty expense of $6 and $20 in depreciation expense.Two million of warranty costs were incurred,and MACRS depreciation amounted to $35.In the absence of other temporary or permanent differences,what was Centipede's taxable income?

Which of the following differences between financial accounting and tax accounting ordinarily creates a deferred tax liability?

Some accountants believe that deferred taxes should not be recognized for certain temporary differences.What is the conceptual basis for this argument?

In its first four years of operations Peridot Jewelers reported the following operating income (loss)amounts: There were no other deferred income taxes in any year.In 2015,Peridot elected to carry back its operating loss.The enacted income tax rate was 40%.In its 2016 income statement,what amount should Peridot report as current income tax payable?

Use the following to answer questions The following information relates to Franklin Freightways for its first year of operations (data in millions of dollars): The applicable tax rate is 40%.There are no other temporary or permanent differences. -Franklin's balance sheet at the end of its first year would report: