Question 1

Deferred income tax liabilities are amounts owed to the government.

Accepted Answer

A) True 
 B)False

Question 2

Temporary differences occur only because accounting standards and income tax laws differ as to when they recognize assets,liabilities,owners' equity,revenues,gains,expenses,and losses.

Accepted Answer

A) True 
 B)False

Question 3

JMR Corporation has income before tax of $800,000.Included in this amount are meals and entertainment amounting to $9,000,warranty costs of $100,000 ($65,000 in warranty claims),depreciation $94,000 and dividends from a taxable Canadian Corporation of $15,000.CCA for the year amounted to $90,000.Calculate taxable income.

Accepted Answer

Taxable income: $800

Question 4

Income tax expense for continuing operations and discontinued operations must be disclosed separately on the income statement.

Accepted Answer

A) True 
 B)False

Question 5

An example of a "deductible amount" occurs when:

Accepted Answer

A)  A gain on instalment sales is recognized for tax purposes as the receivable is collected, but was earlier recognized for accounting purposes when the sale was made. 
B)  Accelerated depreciation is used for tax purposes but straight-line depreciation is used for accounting purposes. 
C)  Product warranty costs recognized for tax purposes as the warranty conditions are met but recognized for accounting purposes earlier on the accrual basis. 
D)  Expenses are recognized more quickly for taxes than for accounting purposes. 
A)  A gain on instalment sales is recognized for tax purposes as the receivable is collected, but was earlier recognized for accounting purposes when the sale was made. 
B)  Accelerated depreciation is used for tax purposes but straight-line depreciation is used for accounting purposes. 
C)  Product warranty costs recognized for tax purposes as the warranty conditions are met but recognized for accounting purposes earlier on the accrual basis. 
D)  Expenses are recognized more quickly for taxes than for accounting purposes.

Question 6

For inter-period tax allocation,the total income tax expense must be allocated to ongoing operations,discontinued operations and extraordinary items on the income statement.

Accepted Answer

A) True 
 B)False

Question 7

STR provided the following data related to income tax allocation:   The deferred tax account showed a zero balance at the start of 2009.There was only one temporary difference,a revenue amount,which was taxable in 2009,but was recorded for accounting purposes in 2010.There are no carry backs or carry forwards.The journal entry to record the income tax consequences for 2009 would include a:

Accepted Answer

A)  Debit of $400 to STR's deferred tax account. 
B)  Credit of $400 to STR's deferred tax account. 
C)  Debit of $136 to STR's deferred tax account. 
D)  Credit of $136 to STR's deferred tax account. 
A)  Debit of $400 to STR's deferred tax account. 
B)  Credit of $400 to STR's deferred tax account. 
C)  Debit of $136 to STR's deferred tax account. 
D)  Credit of $136 to STR's deferred tax account.

Question 8

EGR Corporation has one asset worth $450,000.Accumulated Depreciation to date is $190,000 and accumulated CCA is $220,000.The Corporation also recorded warranty expense of $30,000.To date no customers have required warranty service,so no warranty expenditures have been made.Assuming the tax rate is constant at 40%,this will result in:

Accepted Answer

A)  A net deferred income tax asset of $30,000 
B)  No temporary difference. 
C)  A net deferred income tax asset of $12,000 
D)  A net deferred income tax liability of $12,000 
A)  A net deferred income tax asset of $30,000 
B)  No temporary difference. 
C)  A net deferred income tax asset of $12,000 
D)  A net deferred income tax liability of $12,000

Question 9

At most,how many deferred tax accounts will a firm report in its balance sheet?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 10

Netting of deferred income tax assets and liabilities is always forbidden under IFRS and ASPE.

Accepted Answer

A) True 
 B)False

Question 11

KER commenced operations in 2013.The company had recorded an accrual for warranty in its books during the year ended December 31,2014 amounting to $100,000.During the year 2014,customers required service from goods sold in 2013 amounting to $60,000.No similar expenditures were made during 2013.KER accrued warranty expenses totalling $100,000 for 2013 and 2014.As a result of the information above,what is the amount of deferred taxes that will appear on the 2014 statement of financial position? KER adheres to ASPE and has elected to use the Taxes Payable Method.Assume a 20% tax rate for both years.

Accepted Answer

A)  Nil. 
B)  A Deferred tax asset of $8,000 
C)  A Deferred tax liability of $8,000 
D)  A Deferred tax asset of $40,000 
A)  Nil. 
B)  A Deferred tax asset of $8,000 
C)  A Deferred tax liability of $8,000 
D)  A Deferred tax asset of $40,000

Question 12

Briefly explain the three basic issues with respect to inter-period income tax allocation.

Accepted Answer

1.Extent of Allocation: There are discus

Question 13

The following information is available for Ryan Corporation: Assets at cost-$260,000 (8 year life,straight-line depreciation,no salvage value,purchased 2 years ago); Accumulated depreciation-$65,000.Accumulated CCA-$105,300; CCA rate-30%; meals and entertainment recorded in the books-$12,000; golf dues paid and expensed on the books-$5,000; pre-tax accounting income-$40,000.No CCA was taken during the current year.Based on this information and a tax rate of 45%,what is taxable income?

Accepted Answer

A)  $51,000 
B)  $41,000 
C)  $46,000 
D)  $34,000 
E)  $35,000 
A)  $51,000 
B)  $41,000 
C)  $46,000 
D)  $34,000 
E)  $35,000

Question 14

EGR Company provided you with the following information:
2013 Net Income: $1,500,000
2014 Net Income: $900,000
2013 Tax rate: 35%
2014 Tax rate: 40%
In addition,the only difference between accounting and tax are warranty costs accrued of $100,000 in 2013.No actual warranty expenses were incurred in 2013 or 2014.Prepare journal entries for 2013 and 2014 to record income tax expense.

Accepted Answer

The answer of EGR Company provided you with the following...

Question 15

The term "taxable amount" includes:

Accepted Answer

A)  Gains that are included in the tax return AFTER they are recognized for accounting purposes. 
B)  Revenues that are included in the tax return BEFORE they are recognized for accounting purposes. 
C)  Losses that are included in the tax return AFTER they are recognized for accounting purposes. 
D)  Warranty deductions for accounting purposes. 
A)  Gains that are included in the tax return AFTER they are recognized for accounting purposes. 
B)  Revenues that are included in the tax return BEFORE they are recognized for accounting purposes. 
C)  Losses that are included in the tax return AFTER they are recognized for accounting purposes. 
D)  Warranty deductions for accounting purposes.

Question 16

The phrase "provision for income taxes" encompasses both income tax expenses and liabilities.

Accepted Answer

A) True 
 B)False

Question 17

ABC Inc.owns a single capital asset.At the end of its first year,the asset`s UCC is higher than its book value due to the company`s choice of depreciation methods.What will be the effect of this difference over the life of the asset,assuming that this trend continues?

Accepted Answer

A)  This will result in a reduction of the initial Deferred Tax Liability, and a corresponding Deferred Income Tax Benefit amount on the Statement of Comprehensive Income in each year. 
B)  This will result in a reduction of the initial Deferred Tax Asset, and a corresponding Deferred Income Tax Benefit amount on the Statement of Comprehensive Income in each year. 
C)  This will result in a reduction of the initial Deferred Tax Liability, and a corresponding Deferred Income Tax Expense amount on the Statement of Comprehensive Income in each year. 
D)  This will result in a reduction of the initial Deferred Tax Asset, and a corresponding Deferred Income Tax Expense amount on the Statement of Comprehensive Income in each year. 
A)  This will result in a reduction of the initial Deferred Tax Liability, and a corresponding Deferred Income Tax Benefit amount on the Statement of Comprehensive Income in each year. 
B)  This will result in a reduction of the initial Deferred Tax Asset, and a corresponding Deferred Income Tax Benefit amount on the Statement of Comprehensive Income in each year. 
C)  This will result in a reduction of the initial Deferred Tax Liability, and a corresponding Deferred Income Tax Expense amount on the Statement of Comprehensive Income in each year. 
D)  This will result in a reduction of the initial Deferred Tax Asset, and a corresponding Deferred Income Tax Expense amount on the Statement of Comprehensive Income in each year.

Question 18

Ryan Company paid golf dues on behalf of their two top employees.This is an example of a:

Accepted Answer

A)  Temporary difference 
B)  Reversing difference 
C)  Permanent difference 
D)  Fully deductible for income tax purposes 
A)  Temporary difference 
B)  Reversing difference 
C)  Permanent difference 
D)  Fully deductible for income tax purposes

Question 19

KER commenced operations in 2013.The company had recorded an accrual for warranty expenses in its books during the year ended December 31,2013,its first year of operations,amounting to $100,000.During the year 2014,customers required service from goods sold in 2014 amounting to $60,000.There were no similar expenditures made during 2013.KER recorded an amount for possible warranty costs for goods sold during the year in the amount of $95,000.Accounting income amounted to $80,000 and the tax rate is 40%.Assuming that KER has no other differences between accounting and tax what are the current and deferred income tax amounts that will appear on the 2014 statement of financial position?

Accepted Answer

A)  Income Taxes Payable (Current): $46,000; deferred tax asset: $54,000 
B)  Income Taxes Payable (Current): $46,000; deferred tax liability: $54,000 
C)  Income Taxes Payable (Current): $22,000; deferred tax asset: $14,000 
D)  Income Taxes Payable (Current): $22,000; deferred tax liability: 14,000 
A)  Income Taxes Payable (Current): $46,000; deferred tax asset: $54,000 
B)  Income Taxes Payable (Current): $46,000; deferred tax liability: $54,000 
C)  Income Taxes Payable (Current): $22,000; deferred tax asset: $14,000 
D)  Income Taxes Payable (Current): $22,000; deferred tax liability: 14,000

Question 20

CDE had taxable income of $7,500 during 2014.CDE used accelerated depreciation for tax purposes ($10,000)and straight-line depreciation for financial accounting purposes ($4,000).On December 30,2014,CDE collected January 2015's $3,000 rent on a lot it rents on a month-by-month basis to JCB.CDE's pre-tax accounting income for 2014 would be (show calculations):

Accepted Answer

$7,500 + $10,000 - $

Deferred income tax liabilities are amounts owed to the government.

Temporary differences occur only because accounting standards and income tax laws differ as to when they recognize assets,liabilities,owners' equity,revenues,gains,expenses,and losses.

Income tax expense for continuing operations and discontinued operations must be disclosed separately on the income statement.

An example of a "deductible amount" occurs when:

For inter-period tax allocation,the total income tax expense must be allocated to ongoing operations,discontinued operations and extraordinary items on the income statement.

At most,how many deferred tax accounts will a firm report in its balance sheet?

Netting of deferred income tax assets and liabilities is always forbidden under IFRS and ASPE.

Briefly explain the three basic issues with respect to inter-period income tax allocation.

The term "taxable amount" includes:

The phrase "provision for income taxes" encompasses both income tax expenses and liabilities.

ABC Inc.owns a single capital asset.At the end of its first year,the asset`s UCC is higher than its book value due to the company`s choice of depreciation methods.What will be the effect of this difference over the life of the asset,assuming that this trend continues?

Ryan Company paid golf dues on behalf of their two top employees.This is an example of a:

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters

Exam 5: The Statement of Cash Flows

Deferred income tax liabilities are amounts owed to the government.

Temporary differences occur only because accounting standards and income tax laws differ as to when they recognize assets,liabilities,owners' equity,revenues,gains,expenses,and losses.

Income tax expense for continuing operations and discontinued operations must be disclosed separately on the income statement.

An example of a "deductible amount" occurs when:

For inter-period tax allocation,the total income tax expense must be allocated to ongoing operations,discontinued operations and extraordinary items on the income statement.

At most,how many deferred tax accounts will a firm report in its balance sheet?

Netting of deferred income tax assets and liabilities is always forbidden under IFRS and ASPE.

Briefly explain the three basic issues with respect to inter-period income tax allocation.

The term "taxable amount" includes:

The phrase "provision for income taxes" encompasses both income tax expenses and liabilities.

ABC Inc.owns a single capital asset.At the end of its first year,the asset`s UCC is higher than its book value due to the company`s choice of depreciation methods.What will be the effect of this difference over the life of the asset,assuming that this trend continues?

Ryan Company paid golf dues on behalf of their two top employees.This is an example of a:

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Depreciation, Amortization, and Impairment

Financial Instruments: Investments in Bonds and Equity Securities

Filters