Exam 13: Income Tax Reporting

A revenue item that causes book income to be more (less)than taxable income when it is initially recorded,is called a temporary difference.

Temporary differences that will cause taxable income in future periods to be lower than book income in future periods give rise to

The accrual of wages expense for book purposes at year-end creates a deferred tax asset on the year-end balance sheet.

If it is more likely than not that future benefits from a deferred tax asset will not be realized in its entirety,a/an

GAAP requires a disclosure that reconciles a company's effective income tax rate and the U.S.statutory income tax rate.

A corporation which incurs a net operating loss may carry the loss back 2 years and forward

The payment of life insurance premiums on company executives is an example of a permanent difference.

Financial statement disclosures concerning income taxes provides financial analysts with information regarding the transactions that had an impact on the year-end deferred income taxes balance.

Companies are required to disclose details about individual temporary differences that give rise to the deferred tax asset and deferred tax liability balances on the balance sheet.

Davis Company began manufacturing operations on January 2, 2015. During 2015 Davis earned pre-tax book income of $85,000 and had taxable income of $75,000. Davis had a temporary difference relating to a prepaid asset that will be expensed as follows for book purposes: 2016 \ 7,500 2017 \ 2,500 -If Davis paid no estimated taxes,income tax payable at the end of 2015 is

Which of the following results in an increase in income tax expense for a particular time period?

Stone Company reported pre-tax book income of $700,000 for book purposes in 2015, the first year of operation. The tax depreciation exceeded its book depreciation by $90,000. The tax rate for 2015 and all future years was 30%. -Income tax expense reported on the income statement for the year ending December 31,2015 would be

For the year ending December 31,2015,the RJ Corporation reported book income before taxes of $579,000.During 2015: RJ's book depreciation expense was $25,000 greater than what was allowed for tax purposes due to a reversing difference;RJ accrued $17,750 of warranty expense which is not deductible for tax purposes until 2016;RJ recognized a $29,000 unrealized loss on an investment which is not deductible for tax purposes until the investment is sold;and RJ's book income included municipal bond interest of $19,500.What was RJ Corporation's 2015 income tax expense assuming a tax rate of 40%?

Sand engaged in operations at the start of 2015 and reported $550,000 in pre-tax book income for the year. Tax depreciation for Sand exceeded book depreciation by $50,000. The tax rate for 2015 was 30%, and Congress had enacted a tax rate of 20% for the years after 2015. -What is the deferred tax liability for Sand at December 31,2015?

A revenue included in the determination of book income this year but never included in taxable income is an example of a temporary difference.

Under the liability approach,the full change in the amount of future liability is recognized as an increase or decrease in income tax expense in the year the

Everwood Co.had net income of $1,000,000 for the year ending December 31,2015,its first year of operations.During this time period,Everwood also had a permanent tax difference of $120,000 and its adjusted pre-tax book income is $1,220,000.Analysts have approximated Everwood's taxable income at $735,000 for the year ending December 31,2011.Which of the following most likely caused the difference between Everwood's book and tax income?

A corporation that incurs a net operating loss must carry the loss back to earlier years before it can carry the loss forward.

Book income tax expense could equal current taxes payable to the IRS plus the increase in deferred tax liabilities plus the increase in deferred tax assets.

A company reported income taxes payable of $99,700,an increase in deferred tax assets of $19,900,and a decrease in deferred tax liabilities of $9,550;therefore book income tax expense equals $70,250.