Exam 6: Accounting for Income Taxes

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

What is the income tax payable under the deferral method for FY2017?

What is the tax expense under the deferral method for FY2016?

During its first year of operations,Karol Corp.reported the following information: • Income before income taxes for the year was $550,000 and the tax rate was 35%. • Depreciation expense was $100,000 and CCA was $50,000. • Warranty expense was reported at $20,000,while actual cash paid out was $10,000. • $25,000 of expenses included in income were not deductible for tax purposes. • No other items affected deferred tax amounts besides these transactions. Required: Prepare the journal entries to record income tax expense for the year.

A company has a deferred tax liability of $20,000 at the beginning of the fiscal year relating to a taxable temporary difference of $80,000.The current year tax rate is 30%. Required: Provide the journal entry to reflect the tax rate change.

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

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

In the first two years of operations,a company reports taxable income of $125,000 and $65,000,respectively.In the first two years,the company paid $50,000 and $13,000.It is now the end of the third year,and the company has a loss of $160,000 for tax purposes.The company carries losses to the earliest year possible.The tax rate is currently 25%. Required: Compute the amount of income tax payable or receivable in the current (third)year.

What is the ending balance of the current year deferred tax liability?

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.

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.

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

GMS Corp.reported $680,000 in income tax expense for the year under the accrual method.Its balance sheet reported an overall increase in deferred income tax liability of $40,000 and a decrease in income tax payable of $50,000.How much would GMS report as income tax expense had it used the taxes payable method?

Which method does not use "temporary differences" to account for income tax expense?

Under the accrual method,what is the tax expense in FY2017?

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?

A company has a deferred tax liability of $112,500 at the beginning of the fiscal year relating to a taxable temporary difference of $450,000.The tax rate for the year increased from 25% to 35%. Required: Provide the journal entry to reflect the tax rate change.

A company has income before tax of $200,000.The company also has a temporary difference of $80,000 relating to capital cost allowance (CCA)in excess of depreciation expense recorded for the year.There are no other permanent or temporary differences.The income tax rate is 40%. Required: Compute the amount of taxes payable and income tax expense.

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

When will a terminal loss occur?