Exam 19: Accounting for Income Taxes

A firm is not required to reconcile the federal statutory tax rate to its effective tax rate.

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

Lyon Group's income before taxes is $450,000 and its tax rate is 30%.Lyon included $30,000 in fines and penalties in the $450,000.There are no other book-tax differences.What is the income tax liability for Lyon Group?

Tetra Corp.recorded book income of $225,000 in 2015.It does not have any permanent differences and the only temporary difference relates to $45,000 unearned income that it recorded for book purposes.Tetra anticipates satisfying this liability equally over the following three years.The current enacted tax rate is 38%.The enacted tax rates for the following three years are 35%,40%,and 45%,respectively.Under U.S.GAAP,what deferred tax amount should Tetra Corp.record for this temporary difference?

Danio Inc.'s income before taxes is $350,000 and its tax rate is 30%.Danio included $20,000 of interest from municipal bonds in the $350,000.There are no other book-tax differences.What is the effective tax rate for Danio Inc.?

Under IFRS,the balance sheet presentation for deferred taxes is to report them as either current or non-current.

Illusions Inc.just completed its second year of operations and has a deferred tax asset of $47,500 related to a net operating loss of $125,000 from the previous year.In the current year Illusions generates $400,000 in revenues and incurs $250,000 in expenses.There are no permanent or temporary book-tax differences.Assuming the same tax rate as last year,what amount will Illusions record for Income Tax Payable in the current year?

Accounting for uncertain tax positions under U.S.GAAP involves a two step approach: ________.

Refer to Kraviz Corporation.What is the net amount of Kravitz' book-tax difference?

Refer to Sonic Speaker Company.What is the largest amount of tax benefit allowed?

Lyon Ltd.,a U.S.GAAP reporter,provides the following information: Sales on account $800,000 Associated warranty expense/liability $200,000 No warranty repairs made to date; under law - Lyon cannot deduct warranty expense for tax purposes until repairs are made. Management estimates that it is more likely than not that the firm will not realize 25% of the deferred tax asset. Tax rate of 35% Prepare a simplified income statement,including the effective tax rate,both with and without the valuation allowance.

When a company adjusts the balance of a deferred tax account to reflect changes in the tax rate,prior-period financial statements will need to be adjusted to reflect this.

The contra-asset to the deferred tax asset account is called ________.

There are questions as to whether or not deferred tax assets and liabilities should be recorded.Based on your understanding of the concepts and accounting terminology - are deferred tax assets and tax liabilities real assets and liabilities?

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

Greene Co.has book income of $425,000,and a tax rate of 30%.Assuming there is no book-tax income difference,what will the journal entry be to record the income tax expense?

When defining the portion of a deferred tax asset that a firm will not realize,IFRS uses the term ________.

Under GAAP,the balance sheet presentation for deferred taxes is to report them as either current or non-current.

TNT Corporation's income tax payable is $210,000 and its tax rate is 35%.Assuming no book-tax income difference,what is TNT's net income?

What purpose does a carryback or carryforward serve to a company with a volatile earnings stream?