Exam 18: Accounting for Income Taxes

Revenue from installment sales is recognized in the period received for tax purposes and recognized in the period earned for accounting purposes. If these periods are different, this is an example of a

What three groups are measuring and timing differences categorized?

Jefferson Corporation reported the following pretax and taxable income items from 2014: Required: 1) Prepare the journal entries for 2014 to record the intraperiod income tax allocation. The tax rate for the first $30,000 of income is 15%; the tax rate thereafter is 35%. 2) Prepare the 2014 income statement for Jefferson Corporation. (Heading is not necessary)

Lewes Company appropriately uses the installment sales method for tax purposes and the accrual method for revenue recognition for accounting purposes. Pertinent data at December 31, 2014, the close of the first year of operations, are as follows: Lewes's tax rate is 30%. What amount should be included in the deferred tax account at December 31, 2014 for these installment sales?

The Wyatt Company reports the following for both pretax financial and taxable income: Wyatt uses the carryback provision for net operating losses when possible. Congress has enacted a tax rate for 2018 and future years of 40%. The entry on December 31, 2017, to record income tax expense would include a

If a corporation recognizes an operating loss carryforward in the year of the loss, it is agreed that the corporation should deduct the tax benefit from its operating loss.

In order to implement FASB's objectives what four principles must a corporation apply to account for its income taxes?

During its first year of operations, 2014, the Cocoa Company reported both a pretax financial and a taxable loss of $300,000. The income tax rate is 30% for the current and future years. Due to a sufficient backlog of sales orders, Cocoa did not establish a valuation allowance to reduce the $90,000 deferred tax asset. However, early in 2015, one major customer, representing 60% of the 2015 year-end sales backlog, went bankrupt. Cocoa now believes that it is more likely than not that 75% of the deferred tax asset will not be realized. The entry to record the valuation allowance would be

Rice, Inc. began operations on January 1, 2014. Depreciation temporary differences were the only differences between pretax financial income (loss) and taxable income (loss) in any year. The income tax rate was 35% in each year and no changes in income tax rates were expected. Pretax financial income (loss) and the temporary differences due to depreciation were as follows: Required: Prepare the income tax journal entry for Rice, Inc. for December 31, 2017; assuming no valuation allowance is required for Rice's deferred tax assets.

Which one of the following transactions would result in the creation of a noncurrent deferred tax liability?

Which one of the following requires interperiod tax allocation?

In 2014, the Puerto Rios Company received insurance proceeds of $300,000 payable upon the death of its previous top executive officer. For financial reporting purposes, Puerto Rios included the $300,000 in pretax accounting income. The life insurance proceeds are exempt from income taxes. Assuming an income tax rate of 35%, what should be reported as deferred income taxes in the 2014 income statement of Puerto Rios for this event?

Which one of the following would require interperiod tax allocation?

Thorn Corporation has deductible and taxable temporary differences. At the beginning of 2014, its deferred tax asset was $12,000, and its deferred tax liability was $17,500. The company expects its future deductible amounts to be "deductible" in 2015 and its future taxable amount to be "taxable in 2016. In 2013, Congress enacted revised tax rates for future years as follows: 2014, 30%, 2015, 32%, and 2016, 35%. At the end of 2014 Thorn had income taxes payable of $23,500, and increase in deferred tax liability of $3,000, and an ending balance in its deferred tax asset of $13,300. Required: Assist Thorn in completing the schedule by filling in the blanks for items related to its income taxes for 2014. Show your computation.

Which of the following is not a timing difference that would cause pretax financial accounting income to differ from taxable income?

Briefly describe the four major differences between IFRS and GAAP in the measurement procedures used in accounting for deferred income taxes.

The Chance Company began operations in 2014 and, for that calendar year, reported an operating loss of $200,000. Due to sufficient verifiable positive evidence, no valuation allowance was established to reduce the deferred tax asset as of December 31, 2014. During 2015, Chance reported pretax accounting income of $375,000. Assuming an income tax rate of 35%, what should Chance record in 2015 as income tax payable at the end of 2015?

When accounting for the current impact of loss carrybacks and carryforwards it is proper to

Differences arising between financial accounting and tax accounting fall into three categories, what are the three categories?

The temporary difference will result in a deferred tax liability when future taxable income will be less than future pretax financial income.