Exam 16: Income Taxes

Pretax accounting income is $100,000 and the tax rate is 40%.Included in income is a $20,000 fine levied for pollution violations and other infractions during the year.In the reconciliation of the statutory and effective rate (beginning with the statutory rate),which one of the following amounts would appear?

Which of the following arguments is supportive of allocation of income taxes?

Which of the following temporary differences ordinarily creates a deferred tax asset?

Which of the following does NOT help explain why income tax expense is different from the product of pretax income times the current tax rate?

The Montoya Corporation reports the following differences between financial and taxable income for the current year: Assume that Montoya Corporation had pretax accounting income [before considering items (a)through (h)] of $850,000 for the current year.Compute the taxable income for the current year.

The data shown below represent the complete taxable income history for Confederacy Corporation.The tax rate was 35% throughout the entire period 2008 through 2015: If the company always chooses the carryback,carryforward option,what is the tax liability for 2014?

Creative Corporation's income statement for the year ended December 31,2014,shows pretax income of $300,000.The following items are treated differently on the tax return and in the accounting records: Assume that Creative's tax rate for 2014 is 40 percent.What is the current portion of Creative's total income tax expense for 2014?

For the current year,Eastern Atlantic Company reported income tax expense of $21,000.Income taxes payable at the end of the prior year were $19,000 and at the end of the current year were $20,000.The deferred tax liability classified as noncurrent that resulted from the use of MACRS for tax purposes and straight-line depreciation for financial reporting purposes increased from $21,000 at the beginning of the current year to $23,000 at the end of the current year.How much cash was paid for income taxes during the year?

The result of interperiod income tax allocation is that

The asset-liability method of interperiod tax allocation currently required by U.S.GAAP is an example of the

Tongass had pretax accounting income of $1,400 during 2014.Tongass used accelerated depreciation for tax purposes ($1,000)and straight-line depreciation for financial reporting purposes ($200).During 2014,Tongass accrued warranty expenses of $900 and paid cash to honor warranties of $500.Tongass's taxable income for 2014 would be

On December 31,2013,Breezeway,Inc.,reported a current deferred tax liability of $140,000 and a noncurrent deferred tax asset of $40,000.At the end of 2014,Breezeway reported a current deferred tax liability of $100,000,and a noncurrent deferred tax liability of $44,000.The deferred tax expense for 2014 is

International accounting standards currently are moving toward the

The books of the Speedster Company for the year ended December 31,2014,showed pretax income of $295,000.In computing the taxable income for federal income tax purposes,the following timing differences were taken into account: Depreciation deducted for tax purposes in excess of Depreciation recorded on the books ................... $14,500 Income from installment sale reportable for tax purposes In excess of income recognized on the books .......... 11,500 What should Speedster record as its current federal income tax liability at December 31,2014,assuming a corporate income tax rate of 30 percent?

For three consecutive years,2012-2014,Siamese Corporation has reported income before taxes of $200,000 for both financial reporting purposes and tax reporting purposes.During this time,Siamese income tax rates were as follows: In 2015,Siamese' tax rate changed to 35 percent.Also in 2015,the company reported a loss for both financial reporting and tax reporting purposes of $200,000.Assuming the company uses the carryback provisions,the amount Siamese' should report as an income tax refund receivable in 2015 is

The accounting profession has wrestled for many years with the issue of interperiod allocation of income tax.Since 1967,the authoritative position of the profession has been that interperiod tax allocation is appropriate.Some in the profession have not agreed with the authoritative position.Some respondents to the Discussion Memorandum for SFAS No.109 advocated that income tax expense for financial reporting should be the amount of taxes payable for the year as determined by the tax return. Required: Assume that you advocate the use of the amount of taxes payable for the year as determined on the tax return as the income tax expense for financial reporting purposes.Provide arguments to support your position.

Which of the following is an example of a temporary difference that could result in a deferred tax asset?

The following information is taken from Glenville Corporation's 2014 financial records: Assume the taxable temporary difference was created entirely in 2014 and will reverse in equal net taxable amounts in each of the next three years.If tax rates are 40 percent in 2014,35 percent in 2015,35 percent in 2016,and 30 percent in 2017,then the total deferred tax liability Glenville should report on its December 31,2014,balance sheet is

Which of the following temporary differences ordinarily results in a deferred tax liability?

Many non-accountants are confused when they hear that company has a tax refund of $1,200,but reported an income tax expense of $7,400.These individuals believe such a situation results from companies keeping two sets of books.They further believe that keeping two sets of books is illegal and should be prohibited. Required: 1.Do companies keep two sets of books and,if they do,is this illegal? 2.How can a company have a tax refund when it also reports an income tax expense?