Exam 18: Accounting for Income Taxes

Life insurance proceeds payable to a corporation upon the death of an insured employee are an example of

In 2014, its first year of operations, Wilber Company reported pretax accounting income of $60,000. Included in the $60,000 was an expense for accrued, unpaid warranty costs of $8,000, which are not deductible until paid for income tax purposes. Wilber's income tax rate was 20%. The entry to record the income tax expense would include a

On January 1, 2014, Bedrock Company began recognizing revenues from all sales under the accrual method for financial reporting purposes and under the installment sales method for income tax purposes. Bedrock reported the following gross margin on sales for 2014 and 2015: The enacted tax rate for both 2014 and 2015 was 30%. Assuming there are no other temporary differences, Bedrock's December 31, 2015 balance sheet would report a deferred tax liability of

Interperiod income tax allocation is based on the assumption that

Identify the three essential characteristics of an asset and explain how deferred tax assets meet these characteristics.

Delmarva Company, during its first year of operations in 2014, reported taxable income of $170,000 and pretax financial income of $100,000. The difference between taxable income and pretax financial income was caused by two timing differences: excess depreciation on tax return, $70,000; and warranty expenses in excess of warranty payments, $40,000. These two timing differences will reverse in the next three years as follows: Enacted tax rates are 30% for 2014, 35% for 2015 and 2016, and 40% for 2017. Required: Prepare the income tax journal entry for Delmarva Company for December 31, 2014.

James Company reports the following information related to their deferred tax items at the end of 2015: Required: Show how the information would be reported on Jame's December 31, 2015, balance sheet.

For each item listed below, indicate whether it involves a: a.permanent difference. b.temporary difference that will result in future deductible amounts (giving rise to deferred tax assets). c.temporary difference that will result in future taxable amounts (giving rise to deferred tax liabilities). Required: Match each item to its descriptive phrase by placing the appropriate letter in the space provided.

Which of the following statements regarding current and deferred income taxes is not correct?

Which of the following are required disclosures related to uncertain tax positions?

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

What conclusion did FASB come to in regards to GAAP for the financial reporting of operating loss carrybacks and carryforwards?

At the end of its first year of operations on December 31, 2014, the Mojave Company reported pretax financial income of $100,000. An investigation of that income revealed the following items: •Bad debts expense of $12,000 was recognized. The accounts will be written off in 2015. •Installment sales of $50,000 were recognized in financial income. These sales were accounted for by the installment sales method for income tax purposes. Only $20,000 was reported on the tax return. •Warranty expenses of $16,000 were accrued for financial reporting purposes, but were not expected to result in a cash payment until 2015. •Depreciation on the tax return exceeded depreciation for financial reporting purposes by $32,000. Assume that any deferred tax assets are considered more likely than not to be realized. The enacted income tax rate for all years is 25%. Required: a.Compute taxable income. b.Prepare the entry to record income tax expense and any related assets and liabilities for Mojave on December 31, 2014.

The acceptable balance sheet classifications for deferred tax assets and deferred tax liabilities under GAAP and IFRS are

At the end of its first year of operations on December 31, 2014, the Brandon Company reported taxable income of $100,000 and had a pretax financial loss of $60,000. Differences between taxable income and pretax financial income included interest revenue received from municipal obligations of $20,000 and warranty expense accruals of $180,000. Warranty expenses of $90,000 are expected to be paid in 2015 and $110,000 in 2016. The enacted income tax rates for 2014, 2015, and 2016 are 30%, 35%, and 40%, respectively. The journal entry to record income tax expense on December 31, 2014, would be

What disclosures are required for "uncertain tax positions" where the position is "more likely than not" of being upheld during a tax audit by the IRS?

Discuss what criteria a company should employ to determine whether a deferred tax asset is considered impaired or "more likely than not" to be realized.

Lakeland Corporation reported the following pretax (and taxable) information for 2014: Required: a.Prepare the lower portion of Lakeland's 2014 income statement, beginning with pretax income for continuing operations. (Omit the heading.) b.Prepare Lakeland's 2014 statement of retained earnings, assuming that retained earnings at January 1, 2014, was $750,000 and the company paid $45,000 of dividends in 2014. (Omit the heading.)

All of the following involve a temporary difference for purposes of income tax allocation except

Deferred tax liabilities and deferred tax assets must be reported on the balance sheet. Required: Explain the process of classifying and reporting deferred tax liabilities and deferred tax assets.