Exam 13: Income Tax Reporting

Income tax expense when interperiod tax allocation is used creates a more stable effective tax rate over time relative to using tax payments as income tax expense.

Under IFRS rules,deferred tax assets and deferred tax liabilities are always reported as noncurrent in a classified balance sheet.

Which one of the following is a permanent difference between book and taxable income?

An expense included in the determination of taxable income this year but not included in book income until next year is an example of a temporary difference.

Both IFRS and U.S.GAAP require a numerical reconciliation that explains the differences between statutory and effective tax rates.

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 no other temporary differences occurred subsequent to 2015,the deferred tax asset at the beginning of 2017 is

During 2015,a company reported an increase in the deferred tax liability account of $47,790,a decrease in the deferred tax asset account of $17,225,and an income tax liability as per the 2015 income tax return of $198,375.What is the income tax expense to be reported on the income statement for the year ending December 31,2015?

Analyzing the disclosures pertaining to deferred income taxes can provide relevant insights into the actions that a company's management has taken to manipulate net income.

Divergence between the statutory rate and the effective rate arise for all of the following reasons except

Treating the taxes paid each year as an expense in the income statement could result in an inappropriate matching between pre-tax book income and income tax expense.

Once a deferred tax asset valuation allowance is established,it can be either increased or decreased in future years.

Smith Company reported $350,000 in book income before income tax during 2015, its first year of operation. The tax depreciation exceeded its book depreciation by $30,000. The tax rate for 2015 and all future years was 40%. -What amount of deferred income tax liability should Smith report in its December 31,2015,balance sheet?

Which of the following can't be assessed by analyzing a company's deferred tax note to the financial statements?

Which of the following is not a proper description with respect to the financial accounting and reporting of income taxes?

GAAP specifies that when the tax rates change,the

The income tax benefit associated with a loss carryback or carryforward is recorded as an adjustment to income tax expense in the year of the loss.

Taylor Company began manufacturing operations on January 2, 2015. During 2015 Taylor earned pre-tax book income of $150,000 and had taxable income of $200,000. Taylor had a temporary difference relating to accrued product warranty costs that are expected to be paid as follows: 2016 \ 30,000 2017 \ 15,000 2018 \ 5,000 -Income tax expense for 2015 is

Book income tax expense when using interperiod tax allocation results in a proper matching of revenues and expenses in the income statement.

During its first year of operations a company recorded accrued expenses totaling $250,000 for book purposes.For tax purposes,$100,000 of the expenses are deductible during the first year of operations and $150,000 are deductible during the second year of operations.The income tax rate for both years is 45%.The balance sheet at the end of the first year of operations will report a deferred tax

At December 31,2015,the Floyd Company reported a $29,600 deferred tax asset pertaining to a $80,000 temporary difference which will reverse equally during the next four years;Floyd also reported a $7,400 deferred tax liability pertaining to a $20,000 temporary difference which will reverse during 2016.After determining the deferred tax asset and liability on December 31,2015,Floyd's management was informed that the income tax rate for years subsequent to 2015 had been changed to 35%.As a result of the tax rate change,Floyd's 2015 income tax expense will