Exam 19: Accounting for Income Taxes

Betz Corporation's income before taxes is $725,000 and its tax rate is 40%.Included in this amount is $50,000 in municipal bond interest and $15,000 in officers' life insurance.There are no other book-tax differences.Prepare the journal entry to record income tax expense and a reconciliation of the statutory tax rate to the effective tax rate.

When a company depreciates a fixed asset at a faster rate for tax purposes than book purposes,this creates a ________.

Refer to Kravitz Corporation.What is Kravitz' taxable income?

Identify and explain the steps in U.S.GAAP's approach to accounting for uncertain tax positions.

Blue Corporation is an IFRS reporter.Blue's income before taxes is $700,000 and the company estimates a deferred tax asset of $48,000 due to a basis difference in warranty liabilities.Management has assessed that it is probable that it will not realize 30% of the deferred tax asset.Assuming a 40% tax rate,how should the realizable deferred tax asset be recorded?

The statutory tax rate is the legally imposed rate in a given taxing jurisdiction.

What should Greene Co.record as its deferred tax liability for 2015?

In 2015,its first year of operations,Neuro Inc.experienced a $234,000 net operating loss and recorded a deferred tax asset of $81,900.Neuro decides that it is more likely than not that it will only be able to generate $175,000 of taxable income during the carryforward period.As a result,without generating additional future taxable income it will not be able to fully realize the NOL carryforward benefit.In order to account for this,what amount will Neuro Inc.record as a valuation allowance?

Woods Company reports income before taxes in the amount of $975,000.The current tax expense is $375,375 and the effective tax rate is 37%.What is the conservatism ratio for Woods Company?

S & C Company reported income before taxes of $111,000 for the years 2013,2014,and 2015.In 2016 they experienced a loss of $222,000.S & C had a tax rate of 30% in 2013 and 2014,and a rate of 40% is 2015 and 2016.The company elects to carry back the loss.What is the necessary journal entry to record the NOL carryback in the year of the loss?

Income tax rate reconciliation under IFRS begins with the U.S.statutory income tax rate.

Charmed Inc.'s income before taxes is $710,000 and its tax rate is 35%.Charmed included $40,000 in non-deductible life insurance premiums in the $710,000.There are no other book-tax differences.What is the journal entry to record income tax expense?

Tom-Kat Inc.'s income before taxes is $340,000 and its tax rate is 30%.Tom-Kat included $40,000 of interest from municipal bonds in the $340,000.There are no other book-tax differences.What is the journal entry to record income tax expense?

Refer to Violet Corporation.What is the necessary journal entry for 2015?

Dante Inc.reported fines and penalties on their income statement this year.What (if any)book-tax difference will result?

Uncertain tax positions may result in a ________.

When a company adjusts the balance of a deferred tax account to reflect changes in their tax rate,this impacts ________.

In 2015 Charmed,Inc.recorded book income of $370,000.The company's only temporary difference relates to a $60,000 installment sale that it recorded for book purposes; there are no permanent differences.Charmed anticipates receiving payments equally over the following three years.The current enacted tax rate in 2015 is 35%.The substantively enacted tax rates for the following three years are 30%,35%,and 38%,respectively. Under IFRS,what deferred tax amount should Charmed record for this temporary difference?

Under U.S.GAAP,companies generally use a balance-sheet approach to account for temporary differences between book and tax treatment of transactions.

List the four possible sources of taxable income that a company should consider when assessing the realizability of a deferred tax asset under U.S.GAAP.