Exam 14: Taxes on the Financial Statements

Which of the following taxes are included in the total income tax expense of a corporation reported on its Federal tax return?

The income tax footnote to the GAAP financial statements includes a reconciliation of a corporation's hypothetical tax on book income to its book tax expense as if it were taxed in full at the applicable U.S.income tax rates.

Qute,Inc. ,earns book net income before tax of $500,000.In computing its book income,Qute deducts $50,000 more in warranty expense for book purposes than is allowed for tax purposes.Qute records no other temporary or permanent book-tax differences.Assuming that the U.S.tax rate is 35% and no valuation allowance is required,what is Qute's total income tax expense reported on its GAAP financial statements?

South,Inc. ,earns book net income before tax of $400,000 in 2012.South acquires a depreciable asset in 2012,and first year tax depreciation exceeds book depreciation by $50,000.At the end of 2012,South's deferred tax liability account balance is $17,500.In 2013,South earns $500,000 book net income before tax,and its book depreciation exceeds tax depreciation by $20,000.South records no other temporary or permanent book-tax differences.Assuming that the U.S.tax rate is 35%,what is South's total income tax expense reported on its GAAP financial statements for 2013?

If a corporation has no subsidiaries outside the U.S. ,its book and taxable income are identical.

Never,Inc. ,earns book net income before tax of $500,000.In computing its book income,Never deducts $50,000 more in warranty expense for book purposes than is allowed for tax purposes.Never records no other temporary or permanent book-tax differences.Assuming that the U.S.tax rate is 35% and no valuation allowance is required,what is Never's deferred income tax asset reported on its GAAP financial statements?

A deferred tax liability represents a potential future tax benefit associated with income reported in the current year GAAP financial statements.

Amelia,Inc. ,is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 34% corporate tax rate and no valuation allowance.

How are deferred tax liabilities and assets categorized on the balance sheet?

The valuation allowance can reduce either a deferred tax asset or a deferred tax liability.

Amelia,Inc. ,is a domestic corporation with the following balance sheet for book and tax purposes at the end of the year.Assume a 34% corporate tax rate and no valuation allowance. Amelia,Inc.'s,gross deferred tax assets and liabilities at the beginning of Amelia's year are listed below.

After applying the balance sheet method to determine the GAAP income tax expense of Poppert Inc. ,the following account balances are found.Determine the balance sheet presentation of these amounts.Hint: Which of the accounts should you combine for the final balance sheet disclosure?

Jogg,Inc. ,earns book net income before tax of $600,000.Jogg puts into service a depreciable asset this year,and first year tax depreciation exceeds book depreciation by $120,000.Jogg has recorded no other temporary or permanent book-tax differences.Assuming that the U.S.tax rate is 35%,and that this is Jogg's first year of operations,what is Jogg's balance in its deferred tax asset and deferred tax liability accounts at year end?

Current tax expense always totals the amount a taxpayer actually paid all Federal,state,and foreign tax authorities in a particular year.

Under GAAP,a corporation can defer reporting the U.S.tax expense related to the earnings of foreign subsidiaries,by taking into account its repatriation plans for these earnings.

A $50,000 cash tax savings that is temporary has the same effect on a corporation's current year effective tax rate as a $50,000 cash tax savings that is a permanent book-tax difference.

Book-tax differences can be explained in part by examining the objectives underlying financial accounting and taxable income computations.Evaluate this statement.

Clipp,Inc. ,earns book net income before tax of $600,000.Clipp puts into service a depreciable asset this year,and first year tax depreciation exceeds book depreciation by $120,000.Clipp has recorded no other temporary or permanent book-tax differences.Assuming that the U.S.tax rate is 35%,what is Clipp's deferred income tax liability reported on its GAAP financial statements?

Kooler,Inc. ,is a domestic corporation.It owns 100% of Texas,Inc. ,a domestic corporation,100% of Paris,a foreign corporation,and 45% of Iowa,Inc. ,a domestic corporation.

Which of the following items are not included in the income tax note for a publicly traded company?