Exam 19: Accounting for Income Taxes

If a company chooses to carryback a net operating loss (NOL),but is not able to fully offset the loss,they will ________.

Companies are required to disclose the amount of income tax expense that is ________.

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

Bach.Co.presents the following information for 2015 and 2016. 2015 information: Sales on account in the amount of $645,000 Warranty expense and associated liability in the amount of $125,000 No other expenses incurred. 2016 information: Sales on account in the amount of $225,000 Warranty repairs made in the amount of $65,000 No expenses incurred. Prepare the journal entries for 2015 and 2016 to record the sales,warranty,and income tax transactions,assume a 40% tax rate.

Big Bear Sporting Goods opened in 2015.They reported sales revenue of $395,000 and expenses of $445,000.There are no permanent or temporary differences,so the book loss and taxable loss will be the same.Big Bear plans on carrying forward the net operating loss (NOL).Assuming a 32% tax rate,what is the necessary journal entry in 2015 to record the NOL carryforward?

In which of the following instances would a company most likely choose the carryforward option for a net operating loss?

In 2014,Squirrel Corp.recorded book income of $175,000.It has one temporary difference which relates to a $50,000 warranty expense that it recorded for book purposes,and no permanent differences.Squirrel anticipates satisfying this liability equally over the following two years.The current enacted tax rate is 40%.The enacted tax rates for the following four years are 30%,35%,30% and 40%,respectively.Under U.S.GAAP,what deferred tax amount should Squirrel Corp.record for this temporary difference?

Moose Company has a high conservatism ratio.This could indicate that the company will have to pay higher taxes in the future relative to the present.

Temporary differences cause the effective income tax rate to vary from the statutory rate.

IFRS uses a two step process in recording the realizability of deferred tax assets.

Refer to Kravitz Corporation.What is Kravitz' effective income tax rate?

In 2015 Tetra Corp.generated $583,000 in revenues and incurs $276,000 in expenses.There are no permanent or temporary book-tax differences.Tetra has a deferred tax asset of $61,250 related to a net operating loss of $175,000 from the previous year. Assuming a 35% tax rate,prepare the tax related journal entry for the current year.

Ivy Group reported income from continuing operations before taxes of $638,000 and income from discontinued operations of $214,000.Ivy also reported $68,000 of unrealized gains from fair value accounting adjustments recorded as other comprehensive income.The company is subject to a 38% tax rate and reports no permanent differences. How much income tax expense does Ivy report as a line item directly below "Income from Continuing Operations before Taxes"?

Under U.S.GAAP companies classify individual deferred tax assets or liabilities with related assets or liabilities as either current or non-current based on ________.

Under U.S.GAAP,when a firm determines that all or a portion of a deferred tax asset is not realizable,they will use a valuation allowance to reduce the balance.

Inferno Inc.is embroiled in a lawsuit.In 2015 they recognize that a loss of $45,000 is probable.Given a tax rate of 40%,how will this be treated in the accounting records?

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

When a company carries forward a net operating loss (NOL),the income tax expense will be reduced in future years,but not income tax payable.

Violet,Inc.recorded a deferred tax asset of $35,000 due to a basis difference in warranty liabilities.Management has assessed that it is more likely than not that the firm will not realize 35% of the deferred tax asset.What is the necessary journal entries to record the valuation allowance?

Blue Company's income before taxes is $400,000 and its tax rate is 40%.Blue included $40,000 of fines and penalties in the $400,000.There are no other book-tax differences.What is the effective tax rate for Blue Company?