Exam 16: Accounting for Income Taxes

At December 31, 2018, Moonlight Bay Resorts had the following deferred income tax items: Deferred tax asset of $54 million related to a current liability Deferred tax asset of $36 million related to a noncurrent liability Deferred tax liability of $120 million related to a noncurrent asset Deferred tax liability of $72 million related to a current asset Moonlight Bay should report in its December 31, 2018, balance sheet a:

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. -Research and development costs reported in the income statement but elected to be capitalized and amortized over five years for tax purposes.

Which of the following statements is true as to GAAP regarding accounting for income taxes, and its use of the asset and liability approach?

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 its income tax expense for its first year of operations?

EZ, Inc., reports pretax accounting income of $400,000, but due to a single temporary difference, taxable income is $500,000. At the beginning of the year, no temporary differences existed. EZ is subject to a tax rate of 40%. Required: Prepare the appropriate journal entry to record EZ's income taxes. Show well-labeled computations.

Information for Kent Corp. for the year 2018: Reconciliation of pretax accounting income and taxable income: Cumulative future taxable amounts all from depreciation temporary differences: The enacted tax rate was 30% for 2017 and thereafter. - What should Kent report as the current portion of its income tax expense in the year 2018?

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. -Warranty expense, tax deductible when paid.

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, 2018. Puritan was certain that it would recover the full tax benefit of the NOL that remained after the operating loss carryback. What did Puritan report on December 31, 2018, as the deferred tax asset for the NOL carryforward?

Which of the following usually results in an increase in a deferred tax liability?

Why are differences in reported amounts for deferred taxes are among the most frequent between IFRS and U.S. GAAP, despite the fact that the two follow similar approaches for accounting for taxation?

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

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. -An operating loss carryback.

The valuation allowance account that is used in conjunction with deferred taxes relates:

In LMC's 2018 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, 2018? Explain.

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:

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

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

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?

Deferred tax assets and liabilities typically are classified as current or long term according to when the underlying temporary difference is expected to reverse.

During the current year, Stern Company had pretax accounting income of $45 million. Stern's only temporary difference for the year was rent received for the following year in the amount of $15 million. Stern's taxable income for the year would be: