Exam 16: Accounting for Income Taxes

How should Hobson report tax on the discontinued operation?

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 Freightways experienced ($ in millions)a current:

Changes in enacted tax rates only affect income tax expense in the years those changes affect tax payable.

Suppose that,in 2017,legislation revised the income tax rates so that Isaac would be taxed in 2018 and beyond at 40%,rather than 30%.Assume that there were no other differences in income for financial statement and tax purposes.Ignoring operating expenses and additional sales in 2017,what deferred tax liability would Isaac report in its year-end 2017 balance sheet?

Which of the following would never require reporting deferred tax assets or deferred tax liabilities?

Valuation allowances reduce deferred tax liabilities to the amount that is more likely than not to be payable in the future.

Reliable Corp.had a pretax accounting income of $30 million this year.This included the collection of $40 million of life insurance proceeds when several key executives died in a plane crash.Temporary differences for the current year netted out to zero.Reliable has had a 40% tax rate and taxable income of $120 million over the previous two years and plans to elect a net operating loss carryback for tax purposes.In the current year financial statements,Reliable would report:

Use the following to answer questions Puritan Corp.reported the following pretax accounting income and taxable income for its first three years of operations: Puritan's tax rate is 40% for all years.Puritan elected a loss carryback. As of December 31,2016.Puritan was certain that it would recover the full tax benefit of the NOL that remained after the operating loss carryback. -What would Puritan report as net income for 2017?

MACRS depreciation typically creates deferred tax liabilities early in the life of an asset.

The Bell Company had the following operating results: Year Income (loss)Tax rate Income tax 2013 40,000 35% 14,000 2014 20,000 35% 7,000 2015 50,000 40% 20,000 2016 (60,000)40% 0 What is the income tax refund receivable?

Using straight-line depreciation for financial reporting purposes and MACRS for tax purposes in the first year of an asset's life creates a:

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

How are deferred tax assets and deferred tax liabilities reported in a classified balance sheet?

Roberts Corp.reports pretax accounting income of $200,000,but due to a single temporary difference,taxable income is only $150,000.At the beginning of the year,no temporary differences existed.Roberts is subject to a tax rate of 40%. Required: Prepare the compound journal entry to record Roberts Corp.'s income taxes.Show well-labeled computations.

Under current tax law a net operating loss may be carried forward up to:

A magazine publisher collects one year in advance for subscription revenue.In the year of providing the magazines to customers,the company would record:

Listed below are five independent situations.For each situation indicate (by letter)whether it will create (A)a deferred tax asset, (L)a deferred tax liability,or (N)neither.

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

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 net income ($ in millions)is:

A net operating loss (NOL)carryforward cannot result in the balance sheet at the end of the NOL year showing: