Question 1

Why is it necessary to distinguish permanent differences from temporary differences?

Accepted Answer

It is necessary to distinguish permanent

Question 2

Why does the tax system appear to treat profits and losses asymmetrically?

Accepted Answer

Currently,Canadian tax laws allow corpor

Question 3

A company earned $860,000 in pre-tax income,while its tax return showed taxable income of $560,000.At a tax rate of 40%,how much is the income tax expense under the taxes payable method permitted under ASPE?

Accepted Answer

A)  $224,000 
B)  $344,000 
C)  $120,000 
D)  $196,000 
A)  $224,000 
B)  $344,000 
C)  $120,000 
D)  $196,000

Question 4

State whether or not discounting of deferred assets and liabilities is required or permitted and explain why or why not.

Accepted Answer

IAS 12 states the following: "Deferred t

Question 5

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

Accepted Answer

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Question 6

What is the tax expense under the deferral method for FY2017?

Accepted Answer

A)  $23,750 
B)  $25,500 
C)  $27,500 
D)  $36,000 
A)  $23,750 
B)  $25,500 
C)  $27,500 
D)  $36,000

Question 7

Describe what is meant by a permanent difference.

Accepted Answer

A permanent difference arises

Question 8

A company facing a 45% tax rate has calculated its taxable income for the year to be $2,100,000.It made installment payments during the year totalling $955,000; this amount has been recorded in an asset account as "income tax installments"
Required:
Prepare the journal entry to record the adjusting entry for income taxes at the end of the year under the taxes payable method.

Accepted Answer

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Question 9

The following summarizes information relating to Crockodile Corporation's operations for the current year.
   Required
Compute the amount of taxes payable and income tax expense for Crockodile Corporation.

Accepted Answer

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Question 10

During its first year of operations,Keen Corp.reported the following information:
• Income before income taxes for the year was $650,000 and the tax rate was 25%.
• Depreciation expense was $200,000 and CCA was $100,000.The carrying amount of property,plant,and equipment at the end of the year was $720,000,while UCC was $820,000.
• Warranty expense was reported at $110,000,while actual cash paid out was $60,000.
• $15,000 of expenses included in income was not deductible for tax purposes.
• No other items affected deferred tax amounts besides these transactions.
Required:
a.Prepare the journal entries to record income tax expense for the year.
b.Assume Keen reported a loss instead of income in its first year of operations.Explain what accounting policy choices are available to Keen to record the tax implications of the loss,and provide a recommendation.

Accepted Answer

a.To record the journal entry,first prep

Question 11

Jay,Kay and Elle Inc.has a deferred tax asset of $50,000 at the beginning and $65,000 at the end of the year.The end-of the year balance corresponds to $162,500 of deductible temporary differences.During the year,the company recorded a $15,000 reversal into the deferred tax asset.The tax rate was 5% higher than the rate in the prior year.
Required:
Determine the following:
a.The tax rate in the prior year.
b.The amount of change in deductible temporary differences during the year.
c.The opening balance of deductible temporary differences for the year.
d.The effect of rate change on the deferred tax asset,if any.

Accepted Answer

a.The current tax rate in effect: $65,00

Question 12

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:

Accepted Answer

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Question 13

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%.The taxes payable are:

Accepted Answer

A)  $48,000 
B)  $80,000 
C)  $112,000 
D)  $32,000 
A)  $48,000 
B)  $80,000 
C)  $112,000 
D)  $32,000

Question 14

Compare and contrast the two tax allocation methods.

Accepted Answer

The two tax allocation methods are the d

Question 15

A company has a deferred tax liability of $120,000 at the beginning of the fiscal year relating to a taxable temporary difference of $300,000.The current year tax rate is 50%.
Required:
Provide the journal entry to reflect the tax rate change.

Accepted Answer

The tax rate associated with t

Question 16

In the first two years of operations,a company reports taxable income of $200,000 and $250,000,respectively.During these first two years,the tax rates were 30% and 35% respectively.It is now the end of the third year,and the company has a loss of $260,000 for tax purposes.The company carries losses to the earliest year possible.The tax rate is currently 40%.The amount of income tax receivable in the current (third)year is:

Accepted Answer

A)  $104,000 
B)  $81,000 
C)  $147,500 
D)  $91,000 
A)  $104,000 
B)  $81,000 
C)  $147,500 
D)  $91,000

Question 17

What is a "taxable" temporary difference?

Accepted Answer

A)  Results in future taxable income being higher than accounting income. 
B)  Results in future taxable income being less than accounting income. 
C)  The amount of income tax payable in the current and future periods. 
D)  Result of an event affecting accounting and taxable income in different periods. 
A)  Results in future taxable income being higher than accounting income. 
B)  Results in future taxable income being less than accounting income. 
C)  The amount of income tax payable in the current and future periods. 
D)  Result of an event affecting accounting and taxable income in different periods.

Question 18

What is the deferred tax liability under the deferral method for FY2017?

Accepted Answer

A)  $3,750 
B)  $23,750 
C)  $27,500 
D)  $36,000 
A)  $3,750 
B)  $23,750 
C)  $27,500 
D)  $36,000

Question 19

Which statement best describes the "deferral method"?

Accepted Answer

A)  This method focuses on the balance sheet. 
B)  This method is an example of a "tax allocation" approach. 
C)  This is the same as the "accrual method" of tax accounting. 
D)  This method is used by companies reporting using IFRS. 
A)  This method focuses on the balance sheet. 
B)  This method is an example of a "tax allocation" approach. 
C)  This is the same as the "accrual method" of tax accounting. 
D)  This method is used by companies reporting using IFRS.

Question 20

Under the accrual method,what is the effect of the tax rate change in FY2019?

Accepted Answer

A)  Increase of 10,000. 
B)  Decrease of 10,000. 
C)  Increase of 30,000. 
D)  Decrease of 30,000. 
A)  Increase of 10,000. 
B)  Decrease of 10,000. 
C)  Increase of 30,000. 
D)  Decrease of 30,000.

Why is it necessary to distinguish permanent differences from temporary differences?

Why does the tax system appear to treat profits and losses asymmetrically?

A company earned $860,000 in pre-tax income,while its tax return showed taxable income of $560,000.At a tax rate of 40%,how much is the income tax expense under the taxes payable method permitted under ASPE?

State whether or not discounting of deferred assets and liabilities is required or permitted and explain why or why not.

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

What is the tax expense under the deferral method for FY2017?

Describe what is meant by a permanent difference.

The following summarizes information relating to Crockodile Corporation's operations for the current year. Required Compute the amount of taxes payable and income tax expense for Crockodile Corporation.

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:

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%.The taxes payable are:

Compare and contrast the two tax allocation methods.

A company has a deferred tax liability of $120,000 at the beginning of the fiscal year relating to a taxable temporary difference of $300,000.The current year tax rate is 50%. Required: Provide the journal entry to reflect the tax rate change.

What is a "taxable" temporary difference?

What is the deferred tax liability under the deferral method for FY2017?

Which statement best describes the "deferral method"?

Under the accrual method,what is the effect of the tax rate change in FY2019?

Current Liabilities and Contingencies

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Pensions and Other Employee Future Benefits

Accounting for Leases

Statement of Cash Flows

Accounting Changes

Filters

Exam 6: Accounting for Income Taxes

Why is it necessary to distinguish permanent differences from temporary differences?

Why does the tax system appear to treat profits and losses asymmetrically?

A company earned $860,000 in pre-tax income,while its tax return showed taxable income of $560,000.At a tax rate of 40%,how much is the income tax expense under the taxes payable method permitted under ASPE?

State whether or not discounting of deferred assets and liabilities is required or permitted and explain why or why not.

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

What is the tax expense under the deferral method for FY2017?

Describe what is meant by a permanent difference.

The following summarizes information relating to Crockodile Corporation's operations for the current year. Required Compute the amount of taxes payable and income tax expense for Crockodile Corporation.

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:

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%.The taxes payable are:

Compare and contrast the two tax allocation methods.

A company has a deferred tax liability of $120,000 at the beginning of the fiscal year relating to a taxable temporary difference of $300,000.The current year tax rate is 50%. Required: Provide the journal entry to reflect the tax rate change.

What is a "taxable" temporary difference?

What is the deferred tax liability under the deferral method for FY2017?

Which statement best describes the "deferral method"?

Under the accrual method,what is the effect of the tax rate change in FY2019?

Current Liabilities and Contingencies

Non-Current Financial Liabilities

Equities

Complex Financial Instruments

Earnings Per Share

Pensions and Other Employee Future Benefits

Accounting for Leases

Statement of Cash Flows

Accounting Changes

Filters