Question 1

Which of the following best describes the focus of ASC 740?

Accepted Answer

A)  ASC 740 takes an "asset and liability approach" that focuses on the balance sheet 
B)  ASC 740 takes an "income and expense approach" that focuses on the income statement 
C)  ASC 740 takes a "taxes paid or refunded approach" that focuses on the statement of cash flows 
D)  ASC 740 takes a "permanent differences approach" that focuses on the effective tax rate reported in the income tax note to the financial statements 
A)  ASC 740 takes an "asset and liability approach" that focuses on the balance sheet 
B)  ASC 740 takes an "income and expense approach" that focuses on the income statement 
C)  ASC 740 takes a "taxes paid or refunded approach" that focuses on the statement of cash flows 
D)  ASC 740 takes a "permanent differences approach" that focuses on the effective tax rate reported in the income tax note to the financial statements

Question 2

Which of the following items would likely not be included in the computation of a company's structural effective tax rate?

Accepted Answer

A)  Tax effects of international operations 
B)  Tax effects of state and local operations 
C)  Tax effects from the domestic production activities deduction 
D)  Tax effects from goodwill impairment 
A)  Tax effects of international operations 
B)  Tax effects of state and local operations 
C)  Tax effects from the domestic production activities deduction 
D)  Tax effects from goodwill impairment

Question 3

Robinson Company had a net deferred tax liability of $34,000 at the beginning of the year, representing a net taxable temporary difference of $100,000. During the year, Robinson reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000 and unfavorable temporary differences of $20,000. During the year, the company's tax rate increased from 34% to 35%. Robinson's deferred income tax expense or benefit for the current year would be:

Accepted Answer

A)  Net deferred tax benefit of $10,500 
B)  Net deferred tax expense of $10,500 
C)  Net deferred tax benefit of $11,500 
D)  Net deferred tax expense of $11,500 
A)  Net deferred tax benefit of $10,500 
B)  Net deferred tax expense of $10,500 
C)  Net deferred tax benefit of $11,500 
D)  Net deferred tax expense of $11,500

Question 4

Which of the following book-tax basis differences results in a deductible temporary difference?

Accepted Answer

A)  Book basis of an employee post-retirement benefits liability exceeds its tax basis 
B)  Book basis of a building exceeds the tax basis of the building 
C)  Book basis of an acquired intangible exceeds the tax basis of the intangible 
D)  Tax basis of a prepaid liability exceeds the book basis of the liability 
A)  Book basis of an employee post-retirement benefits liability exceeds its tax basis 
B)  Book basis of a building exceeds the tax basis of the building 
C)  Book basis of an acquired intangible exceeds the tax basis of the intangible 
D)  Tax basis of a prepaid liability exceeds the book basis of the liability

Question 5

MAC, Inc. completed its first year of operations with a pretax loss of $300,000. The tax return showed a net operating loss of $500,000, which MAC will carry forward. The $200,000 book-tax difference results from excess tax depreciation over book depreciation. Management has determined that they should record a valuation allowance equal to the net deferred tax asset. Assuming a tax rate of 34%, prepare the journal entries to record the deferred tax provision and the valuation allowance.

Accepted Answer

The deferred tax lia

Question 6

ASC 740 permits a corporation to net its current and long-term deferred tax liabilities.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements best describes a valuation allowance as it relates to accounting for income taxes?

Accepted Answer

A)  A valuation allowance is a contra account to deferred tax assets only 
B)  A valuation allowance is a contra account to deferred tax liabilities only 
C)  A valuation allowance is a contra account to deferred tax assets and liabilities 
D)  A valuation allowance is a contra account to noncurrent deferred tax assets only 
A)  A valuation allowance is a contra account to deferred tax assets only 
B)  A valuation allowance is a contra account to deferred tax liabilities only 
C)  A valuation allowance is a contra account to deferred tax assets and liabilities 
D)  A valuation allowance is a contra account to noncurrent deferred tax assets only

Question 8

Gull Corporation reported pretax book income of $2,000,000. Included in the computation were favorable temporary differences of $300,000, unfavorable temporary differences of $200,000, and favorable permanent differences of $50,000. Assuming a tax rate of 34%, compute Gull's current income tax expense or benefit.

Accepted Answer

The answer of Gull Corporation reported pretax book income of...

Question 9

Weber Corporation reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $100,000, unfavorable temporary differences of $300,000, and unfavorable permanent differences of $200,000. Compute the Company's book equivalent of taxable income. Use this number to compute the Company's total income tax provision or benefit, assuming a tax rate of 34%.

Accepted Answer

BETI of $600,000 and

Question 10

Abbot Corporation reported pretax book income of $500,000. During the current year, the reserve for bad debts increased by $5,000. In addition, tax depreciation exceeded book depreciation by $40,000. Finally, Abbot received $3,000 of tax-exempt life insurance proceeds from the death of one of its officers. Using a tax rate of 34%, Abbot's current income tax expense or benefit would be:

Accepted Answer

A)  $186,320 
B)  $170,000 
C)  $157,080 
D)  $153,680 
A)  $186,320 
B)  $170,000 
C)  $157,080 
D)  $153,680

Question 11

Which of the following statements best describes the ASC 740 process for evaluating a company's uncertain tax positions?

Accepted Answer

A)  ASC 740 requires a company to complete a two-step analysis every time it evaluates its uncertain tax positions. 
B)  ASC 740 requires a company to complete step 2 (measurement) in its evaluation of its uncertain tax positions only if it is more-likely-than-not that that its tax position will be sustained on its merits (recognition). 
C)  ASC 740 allows a company to take into account the probability of audit by a tax authority in step 1 (measurement) in its evaluation of its uncertain tax positions. 
D)  ASC 740 allows a company to record a tax benefit from an uncertain tax position only if it is probable the benefit will be sustained on audit by a tax authority. 
A)  ASC 740 requires a company to complete a two-step analysis every time it evaluates its uncertain tax positions. 
B)  ASC 740 requires a company to complete step 2 (measurement) in its evaluation of its uncertain tax positions only if it is more-likely-than-not that that its tax position will be sustained on its merits (recognition). 
C)  ASC 740 allows a company to take into account the probability of audit by a tax authority in step 1 (measurement) in its evaluation of its uncertain tax positions. 
D)  ASC 740 allows a company to record a tax benefit from an uncertain tax position only if it is probable the benefit will be sustained on audit by a tax authority.

Question 12

Once determined, an unrecognized tax benefit under ASC 740 is not readjusted for subsequent events.

Accepted Answer

A) True 
 B)False

Question 13

TarHeel Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $25,000. In addition, tax depreciation exceeded book depreciation by $100,000. Finally, TarHeel subtracted a dividends received deduction of $25,000 in computing its current year taxable income. Assume a tax rate of 34%. TarHeel's accounting effective tax rate is:

Accepted Answer

A)  34% 
B)  33.15% 
C)  31.45% 
D)  30.6% 
A)  34% 
B)  33.15% 
C)  31.45% 
D)  30.6%

Question 14

Farm Corporation reported pretax book loss of $500,000 in 2014. Tax depreciation exceeded book depreciation by $100,000. In addition, Farm received prepaid income of $50,000, which was included on its tax return but was not included in the book loss. Farm had $0 taxable income in 2013 and 2012. Assuming a tax rate of 34%, compute the Company's deferred income tax expense or benefit for 2014.

Accepted Answer

$170,000 d

Question 15

Sparrow Corporation reported pretax book income of $5,000,000. During the current year, the reserve for warranties increased by $300,000. In addition, tax depreciation exceeded book depreciation by $400,000. Finally, Sparrow received $50,000 of tax-exempt interest from municipal bonds. Using a tax rate of 34%, compute Sparrow's current income tax expense or benefit.

Accepted Answer

The answer of Sparrow Corporation reported pretax book income of...

Question 16

ASC 740 deals with accounting for uncertain tax positions.

Accepted Answer

A) True 
 B)False

Question 17

Lafayette, Inc. completed its first year of operations with a pretax loss of $800,000. The tax return showed a net operating loss of $750,000, which the company will carry forward. The $50,000 book-tax difference results from a disallowed deduction for meals and entertainment. Management has determined that they should record a valuation allowance equal to the net deferred tax asset. Assuming a tax rate of 34%, prepare the journal entries to record the deferred tax provision and the valuation allowance.

Accepted Answer

The disallowed meals and enter

Question 18

A cumulative financial accounting (book) loss over three years likely would be considered significant negative evidence in a valuation allowance analysis.

Accepted Answer

A) True 
 B)False

Question 19

Jones Company reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000, unfavorable temporary differences of $20,000, and favorable permanent differences of $40,000. Book equivalent of taxable income is:

Accepted Answer

A)  $440,000 
B)  $400,000 
C)  $360,000 
D)  $330,000 
A)  $440,000 
B)  $400,000 
C)  $360,000 
D)  $330,000

Question 20

Frost Corporation reported pretax book income of $3,000,000. Included in the computation were favorable temporary differences of $200,000, unfavorable temporary differences of $350,000, and unfavorable permanent differences of $50,000. Using a tax rate of 34%, compute Frost's deferred income tax expense or benefit.

Accepted Answer

$51,000 de

Which of the following best describes the focus of ASC 740?

Which of the following items would likely not be included in the computation of a company's structural effective tax rate?

Which of the following book-tax basis differences results in a deductible temporary difference?

ASC 740 permits a corporation to net its current and long-term deferred tax liabilities.

Which of the following statements best describes a valuation allowance as it relates to accounting for income taxes?

Which of the following statements best describes the ASC 740 process for evaluating a company's uncertain tax positions?

Once determined, an unrecognized tax benefit under ASC 740 is not readjusted for subsequent events.

ASC 740 deals with accounting for uncertain tax positions.

A cumulative financial accounting (book) loss over three years likely would be considered significant negative evidence in a valuation allowance analysis.

Jones Company reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000, unfavorable temporary differences of $20,000, and favorable permanent differences of $40,000. Book equivalent of taxable income is:

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Investments

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The US Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning of the Cfa Institute

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Exam 17: Accounting for Income Taxes

Which of the following best describes the focus of ASC 740?

Which of the following items would likely not be included in the computation of a company's structural effective tax rate?

Which of the following book-tax basis differences results in a deductible temporary difference?

ASC 740 permits a corporation to net its current and long-term deferred tax liabilities.

Which of the following statements best describes a valuation allowance as it relates to accounting for income taxes?

Which of the following statements best describes the ASC 740 process for evaluating a company's uncertain tax positions?

Once determined, an unrecognized tax benefit under ASC 740 is not readjusted for subsequent events.

ASC 740 deals with accounting for uncertain tax positions.

A cumulative financial accounting (book) loss over three years likely would be considered significant negative evidence in a valuation allowance analysis.

Jones Company reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000, unfavorable temporary differences of $20,000, and favorable permanent differences of $40,000. Book equivalent of taxable income is:

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Investments

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Corporate Operations

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The US Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning of the Cfa Institute

Filters