Question 1

________ differences between book income and taxable income result in an effective tax rate that differs from the statutory tax rate.

Accepted Answer

A) Temporary 
B) Permanent 
C) Short-term 
D) Long-term 
A) Temporary 
B) Permanent 
C) Short-term 
D) Long-term

Question 2

Red Lantern Company experienced a net operating loss of $654,000 in 2015.The company reported taxable income of $543,000 in 2013 and $321,000 in 2014.The tax rate for all years is 35%.Assuming the company uses the carryback provisions for the net operating loss,prepare the following for the year of the loss:
a)The necessary journal entry to record the NOL carryback.
b)A partial income statement beginning with the net loss before benefit.

Accepted Answer

a)Journal Entry: @#IMG-DLM&

Question 3

Cougar,Inc.,an IFRS reporter,estimates a deferred tax asset of $60,000 due to a basis difference in warranty liabilities.Management has assessed that it is probable that the firm will not realize 40% of the deferred tax asset.After recording the net deferred tax asset,Cougar's net income will ________ and assets will ________.

Accepted Answer

A) increase by $24,000; increase by $24,000 
B) decrease by $24,000; decrease by $24,000 
C) increase by $60,000; decrease by $60,000 
D) decrease by $60,000; increase by $60,000 
A) increase by $24,000; increase by $24,000 
B) decrease by $24,000; decrease by $24,000 
C) increase by $60,000; decrease by $60,000 
D) decrease by $60,000; increase by $60,000

Question 4

Gallagher Corporation's book income before taxes is $600,000 and its tax rate is 35%.Included in the income before taxes is $50,000 in fines and penalties.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.

Accepted Answer

Journal Entry: @#IMG-DLM& 
 ($

Question 5

Crystal Critters,Inc.,a U.S.GAAP reporter,has the deferred tax assets and liabilities presented below:   Assuming it meets the conditions to net assets and liabilities,what amount will the company report for the net current and non-current deferred taxes?

Accepted Answer

A) net current deferred tax liability $55,000; non-current deferred tax liability $75,000 
B) net current deferred tax asset $55,000; non-current deferred tax liability $75,000 
C) net current deferred tax asset $90,000; net non-current deferred tax liability 110,000 
D) net current deferred tax liability $35,000; net non-current deferred tax asset $75,000 
A) net current deferred tax liability $55,000; non-current deferred tax liability $75,000 
B) net current deferred tax asset $55,000; non-current deferred tax liability $75,000 
C) net current deferred tax asset $90,000; net non-current deferred tax liability 110,000 
D) net current deferred tax liability $35,000; net non-current deferred tax asset $75,000

Question 6

Refer to Sonic Speaker Company.What is the journal entry to record the current year's tax provision and the liability for the uncertain tax provision?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 7

Betta Group just completed its second year of operations and has a deferred tax asset of $75,200 related to a net operating loss of $235,000 from the previous year.In the current year Betta generates $645,000 in revenues and incurs $321,000 in expenses.There are no permanent or temporary book-tax differences.Assuming the same tax rate as last year,what is the tax related journal entry for the current year?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 8

If the valuation allowance is decreased,there is a(n)________ to income tax expense and a(n)________ to income tax benefit.

Accepted Answer

A) decrease; increase 
B) increase; increase 
C) increase; decrease 
D) decrease; decrease 
A) decrease; increase 
B) increase; increase 
C) increase; decrease 
D) decrease; decrease

Question 9

Netting deferred tax assets and liabilities is permitted as long as the right to offset exists.

Accepted Answer

A) True 
 B)False

Question 10

S & C Company's net income before taxes is $400,000,and income tax expense is $125,000.S & C records a valuation allowance of $25,000.What is S & C's effective tax rate before and after recording the valuation allowance?

Accepted Answer

A) 31% and 25% respectively 
B) 25% and 33% respectively 
C) 31% and 38% respectively 
D) There would not be a change in ETR because these are due to temporary differences. 
A) 31% and 25% respectively 
B) 25% and 33% respectively 
C) 31% and 38% respectively 
D) There would not be a change in ETR because these are due to temporary differences.

Question 11

Betta Group's net income after taxes is $300,000 and its tax rate is 40%.Assuming no book-tax income difference,what is Betta's taxes payable?

Accepted Answer

A) $120,000 
B) $200,000 
C) $750,000 
D) $500,000 
A) $120,000 
B) $200,000 
C) $750,000 
D) $500,000

Question 12

With regard to deferred tax items,a company must disclose all of the following except ________.

Accepted Answer

A) the amount and expiration of carryforwards for net operating losses and unused tax credits 
B) the amount of the valuation allowance or any change in valuation allowance 
C) the individual components of all deferred tax assets and deferred tax liabilities 
D) All of the above must be disclosed. 
A) the amount and expiration of carryforwards for net operating losses and unused tax credits 
B) the amount of the valuation allowance or any change in valuation allowance 
C) the individual components of all deferred tax assets and deferred tax liabilities 
D) All of the above must be disclosed.

Question 13

Caesar Corporation reports municipal interest income on their financial statements.What (if any)book-tax difference will result?

Accepted Answer

A) Temporary difference - book income greater than taxable income. 
B) Temporary difference - taxable income greater than book income. 
C) Permanent difference - book income greater than taxable income. 
D) No difference - municipal interest is taxable income. 
A) Temporary difference - book income greater than taxable income. 
B) Temporary difference - taxable income greater than book income. 
C) Permanent difference - book income greater than taxable income. 
D) No difference - municipal interest is taxable income.

Question 14

The Betta Group reports income before taxes in the amount of $625,000 and has a 30% tax rate.Additionally,the company estimates a deferred tax asset of $45,000 due to a basis difference in warranty liabilities.After reviewing all available evidence,management determines that only 60% of this amount will ultimately result in tax-deductible expenses over the warranty period.
Prepare the necessary journal entries to record the tax provision and valuation allowance for Betta Group under (a)U.S.GAAP and (b)IFRS.

Accepted Answer

(a)U.S.GAAP
 @#IMG-DLM& 
 @#IMG-DLM& 
 (

Question 15

When assessing realizability of deferred tax assets,management must consider positive and negative evidence.All of the following would be considered positive evidence except ________.

Accepted Answer

A) taxable income in prior carryback year(s)if carryback is permitted under the tax law 
B) future reversals of existing taxable temporary differences 
C) unsettled circumstances that could adversely affect future operations 
D) an excess of appreciated asset value over the tax basis of the entity's net assets 
A) taxable income in prior carryback year(s)if carryback is permitted under the tax law 
B) future reversals of existing taxable temporary differences 
C) unsettled circumstances that could adversely affect future operations 
D) an excess of appreciated asset value over the tax basis of the entity's net assets

Question 16

All of the following are examples of temporary book-tax differences except ________.

Accepted Answer

A) contingent liabilities 
B) depreciation 
C) product warranty costs 
D) payment of premiums for life insurance 
A) contingent liabilities 
B) depreciation 
C) product warranty costs 
D) payment of premiums for life insurance

Question 17

S & C Company reported $200,000 depreciation on its 2015 tax return; however,they reported $50,000 depreciation expense on their 2015 income statement.The difference in depreciation is a temporary difference that will reverse over time.Assuming S & C's tax rate is constant at 30%,what amount should be added to the deferred income tax liability in S & C's December 31,2015,balance sheet?

Accepted Answer

A) $15,000 
B) $45,000 
C) $60,000 
D) $75,000 
A) $15,000 
B) $45,000 
C) $60,000 
D) $75,000

Question 18

Taxable income refers to the amount of income reported on a company's tax return.

Accepted Answer

A) True 
 B)False

Question 19

An intraperiod tax allocation ________.

Accepted Answer

A) results when different income statement items are taxed at different rates 
B) occurs when certain revenues and expenses appear in the financial statements either before or after they are included in the income tax return 
C) allocates income tax expense to different sections of the comprehensive income statement 
D) deals with allocation of taxes between current and future periods 
A) results when different income statement items are taxed at different rates 
B) occurs when certain revenues and expenses appear in the financial statements either before or after they are included in the income tax return 
C) allocates income tax expense to different sections of the comprehensive income statement 
D) deals with allocation of taxes between current and future periods

Question 20

When a company pays taxes that were previously recorded as a deferred tax liability,the temporary difference ________.

Accepted Answer

A) originates 
B) reverses 
C) increases 
D) decreases 
A) originates 
B) reverses 
C) increases 
D) decreases

________ differences between book income and taxable income result in an effective tax rate that differs from the statutory tax rate.

Crystal Critters,Inc.,a U.S.GAAP reporter,has the deferred tax assets and liabilities presented below: Assuming it meets the conditions to net assets and liabilities,what amount will the company report for the net current and non-current deferred taxes?

Refer to Sonic Speaker Company.What is the journal entry to record the current year's tax provision and the liability for the uncertain tax provision?

If the valuation allowance is decreased,there is a(n) to income tax expense and a(n) to income tax benefit.

Netting deferred tax assets and liabilities is permitted as long as the right to offset exists.

S & C Company's net income before taxes is $400,000,and income tax expense is $125,000.S & C records a valuation allowance of $25,000.What is S & C's effective tax rate before and after recording the valuation allowance?

Betta Group's net income after taxes is $300,000 and its tax rate is 40%.Assuming no book-tax income difference,what is Betta's taxes payable?

With regard to deferred tax items,a company must disclose all of the following except ________.

Caesar Corporation reports municipal interest income on their financial statements.What (if any)book-tax difference will result?

When assessing realizability of deferred tax assets,management must consider positive and negative evidence.All of the following would be considered positive evidence except ________.

All of the following are examples of temporary book-tax differences except ________.

Taxable income refers to the amount of income reported on a company's tax return.

An intraperiod tax allocation ________.

When a company pays taxes that were previously recorded as a deferred tax liability,the temporary difference ________.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

OL: Revenue Recognition

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, cost Allocation, and Derecognition

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

OL: Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

Filters

Exam 19: Accounting for Income Taxes

________ differences between book income and taxable income result in an effective tax rate that differs from the statutory tax rate.

Crystal Critters,Inc.,a U.S.GAAP reporter,has the deferred tax assets and liabilities presented below: Assuming it meets the conditions to net assets and liabilities,what amount will the company report for the net current and non-current deferred taxes?

Refer to Sonic Speaker Company.What is the journal entry to record the current year's tax provision and the liability for the uncertain tax provision?

If the valuation allowance is decreased,there is a(n)________ to income tax expense and a(n)________ to income tax benefit.

Netting deferred tax assets and liabilities is permitted as long as the right to offset exists.

S & C Company's net income before taxes is $400,000,and income tax expense is $125,000.S & C records a valuation allowance of $25,000.What is S & C's effective tax rate before and after recording the valuation allowance?

Betta Group's net income after taxes is $300,000 and its tax rate is 40%.Assuming no book-tax income difference,what is Betta's taxes payable?

With regard to deferred tax items,a company must disclose all of the following except ________.

Caesar Corporation reports municipal interest income on their financial statements.What (if any)book-tax difference will result?

When assessing realizability of deferred tax assets,management must consider positive and negative evidence.All of the following would be considered positive evidence except ________.

All of the following are examples of temporary book-tax differences except ________.

Taxable income refers to the amount of income reported on a company's tax return.

An intraperiod tax allocation ________.

When a company pays taxes that were previously recorded as a deferred tax liability,the temporary difference ________.

The Financial Reporting Environment

Financial Reporting Theory

Judgment and Applied Financial Accounting Research

Review of the Accounting Cycle

Statements of Net Income and Comprehensive Net Income

Statements of Financial Position and Cash Flows and the Annual Report

Accounting and the Time Value of Money

Revenue Recognition

OL: Revenue Recognition

Short-Term Operating Assets: Cash and Receivables

Short-Term Operating Assets: Inventory

Long-Term Operating Assets: Acquisition, cost Allocation, and Derecognition

Long-Term Operating Assets: Departures From Historical Cost

Operating Liabilities and Contingencies

OL: Operating Liabilities and Contingencies

Financing Liabilities

Accounting for Stockholders Equity

Investing Assets

Accounting for Employee Compensation and Benefits

Earnings Per Share

Accounting Corrections and Error Analysis

Filters

If the valuation allowance is decreased,there is a(n) to income tax expense and a(n) to income tax benefit.