Exam 16: Accounting for Income Taxes

On its tax return at the end of the current year Webnet Inc.has $6 million of tax depreciation in excess of depreciation in its income statement.A disclosure note reveals that $1 million of the $6 million difference will reverse itself next year,and the remainder will reverse over the next 4 years.In the absence of other temporary differences,in the balance sheet at the end of the current year Webnet would report:

Which of the following causes a permanent difference between taxable income and pretax accounting income?

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

What disclosures for deferred taxes,pertaining to the income statement,are required by GAAP regarding accounting for income taxes?

How much tax expense on income from continuing operations would be reported in Hobson's income statement?

The effect of a change in tax rates:

Rent collected in advance results in deferred tax assets.

A temporary difference originates in one period and reverses,or turns around,in one or more later periods.

Which of the following circumstances creates a future deductible amount?

In its first year of operations,Woodmount Corporation reported pretax accounting income of $500 million for the current year.Depreciation reported in the tax return in excess of depreciation in the income statement was $60 million.The excess tax will reverse itself evenly over the next three years.The current year's tax rate of 40% will be reduced under the current law to 35% next year and 30% for all subsequent years.At the end of the current year,the deferred tax liability related to the excess depreciation will be:

A net operating loss (NOL)carryforward creates a deferred tax liability that should be classified as current to the extent that the NOL will be recovered in the following year.

In reconciling net income to taxable income,interest earned on municipal bonds is:

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): -Why are the depreciation and patent amortization listed as deferred tax liabilities?

Clinton Corp.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 40%.For its 2015 tax return,Clinton did not elect a net operating loss carryback.No valuation account was deemed necessary for the deferred tax asset as of December 31,2015.What was Clinton's income tax expense in 2016?

Listed below are 5 terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the most correct term.

An unrealized gain from marking an investment to fair value typically creates a deferred tax asset.

The following information is for Hulk Gyms' first year of operations.Amounts are in millions of dollars.The enacted tax rate is 30%. Required: Prepare a compound journal entry to record the income tax expense for the year 2016.Show well-labeled computations.

When tax rates are changed subsequent to the creation of a deferred tax asset or liability,GAAP requires that:

If a company's deferred tax asset is not reduced by a valuation allowance,the company believes it is:

At the end of the current year,Newsmax Inc.has $400,000 of subscriptions received in advance included in its balance sheet.A disclosure note reveals that the entire $400,000 will be earned in the next year.In the absence of other temporary differences,in the balance sheet one would also expect to find a: