Exam 13: Income Tax Reporting

Interperiod tax allocation refers to the allocation of income tax expense across periods when book and taxable income differ.

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. -If Sand paid no estimated taxes,what is the amount of income tax payable for Sand at the end of 2015?

A significant decrease in the deferred tax asset account is relevant with respect to assessing earnings quality.

During 2015,its first year of operations,a company recorded depreciation expense of $50,000 for book purposes.For tax purposes during 2015,$100,000 of depreciation expense was deducted.The temporary difference created during 2015 will reverse equally during 2016 and 2017.Book income from operations during the first year was $570,000.The income tax rate is 40%.The income tax expense to be reported in the income statement for the first year of operations is

When financial statement notes regarding deferred taxes reveal a sudden decrease in deferred tax assets,it can be a potential sign of deteriorating earnings quality.

During its first three years of operations a company reported income before taxes of $1,000,000 in year 1, ($1,800,000) in year 2, and $3,000,000 in year 3. The income tax rate applicable to each of the years was 40%. Assume that there weren't any temporary differences and a valuation allowance was not necessary. -How much income tax expense was reported in year 3 if the company elected a loss carryback?

The GAAP solution for avoiding distortions that would result from setting income tax expense equal to taxes owed is called

The allocation of the tax provision across various components of book income within a given period is called interperiod tax allocation.

A company reported income taxes payable of $199,200,a decrease in deferred tax assets of $19,900,and a decrease in deferred tax liabilities of $12,450;therefore book income tax expense equals $191,750.

The determination of whether or not a valuation allowance is necessary is based on subjective assessment.

Key differences between U.S.GAAP and IFRS regarding deferred taxes include all of the following except

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 -Income tax expense for 2015 is

A cash payment received from a customer recorded as unearned revenue for book purposes creates a deferred tax liability.

During 2015,a company reported an increase in the deferred tax liability account of $77,990,an increase in the deferred tax asset account of $35,325,and an income tax liability as per the 2015 income tax return of $398,555.What is the income tax expense to be reported on the income statement for the year ending December 31,2015?

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%. -If Smith paid no estimated taxes,what amount of income taxes payable should Smith report in its December 31,2015,balance sheet?

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 current portion of the tax expense for Sand for 2015?

Both IFRS and U.S.GAAP require firms to classify deferred tax assets and liabilities as current or noncurrent depending on the classification of the asset or liability giving rise to the temporary difference.

Under IFRS,deferred tax assets

The disclosures with respect to deferred income taxes can be used to analyze the differences in financial reporting choices across firms and therefore enhance interfirm comparisons.

During its first year of operations a company recorded revenues totaling $6,000,000 for book purposes.For tax purposes,$2,400,000 of the revenue is taxable during the first year of operations and $3,600,000 is taxable during the second year of operations.The income tax rate for both years is 40%.The balance sheet at the end of the first year of operations will report a deferred tax liability of