Exam 16: Accounting for Income Taxes

A company had taxable income of $2 million in fiscal 2017 and paid taxes of .7 million;the company incurred a loss of $8 million in fiscal 2018 when the tax rate is 50%.How much refund is the company entitled to?

What is the opening balance of the deferred tax liability account considering the rate change?

When will there be a recapture of depreciation?

A large public company reported that its provision for income taxes was $500 million and that it has a deferred tax liability of 2 billion.A Member of Parliament calls you and says,I see hundreds of companies who have these huge deferred tax liabilities on their balance sheets.If the government could get even half of what's owed,it could cut the public deficit down to size in a hurry. Required: Write a memo to the Member of Parliament explaining the issues.

Why is the taxes payable method not an accepted approach under IFRS? What difference explains why ASPE permits this approach in addition to the accrual approach?

The following information relates to the accounting income for Ontario Uranium Enterprises (OUE)for the current year ended December 31. During the year,the company sold one of its machines with carrying value of $85,000 for proceeds of $10,000,resulting in an accounting loss of $75,000.This loss has been included in the pre-tax income figure of $850,000 shown above.For tax purposes,the proceeds from the disposal were removed from the undepreciated capital cost (VCC)of Class 8 assets. The deferred income tax liability account on January 1 had a credit balance of $230,000.This balance is entirely related to property,plant,and equipment (PPE). Required: Prepare the journal entries to record income taxes for OUE.

A company has a deferred tax liability of $60,000 at the beginning of the fiscal year relating to a taxable temporary difference of $300,000.The tax rate for the year increased from 20% to 25%. Required: Provide the journal entry to reflect the tax rate change.

Which statement is correct?

How much tax expense would be recorded under the accrual method for FY2017?

Summarize the rules covering presentation and disclosure of the following items according to IFRS using the following template:

For each of the following differences between the amount of taxable income and income recorded for financial reporting purposes,compute the effect of each difference on deferred taxes balances on the balance sheet.Treat each item independently of the others.Assume a tax rate of 25%.

Indicate whether the item would result in future income taxes being higher,future income taxes being lower or neither:

Explain the large and growing amount of deferred tax liabilities on corporations' balance sheets mentioned in the opening vignette of this chapter.

Under the accrual method,what is the effect of the tax rate change in FY2016?

In the first year of operations,a company reports taxable income of $225,000 and paid a tax rate of 28%.It is now the end of the second year,and the company has a loss of $375,000 for tax purposes.The company's management believes it is probable the company will be able to use up its tax losses.The tax rate is currently 32%. Required: Compute the amounts of income tax receivable and/ or deferred income tax asset in the current (second)year.

What is the deferred tax liability under the deferral method for FY2016?

A company had taxable income of $12 million in fiscal 2016 and paid taxes of 4.8 million;the company incurred a loss of $7 million in fiscal 2017 when the tax rate is 50%.How much refund is the company entitled to?

Under ASPE,Section 3465 indicates less onerous disclosures as private enterprises are permitted to use the tax payable method.Summarize the rules covering presentation and disclosure of the following items according to ASPE using the following template:

Which is correct regarding the effect of tax rate changes on income tax expense,assets and liabilities?

How much tax expense would be recorded under the accrual method for FY2017?