Question 1

How should Hobson report tax on the discontinued operation?

Accepted Answer

A) A tax receivable of $12 million in the balance sheet. 
B) A tax benefit of $12 million to net against the $30 million pretax loss. 
C) A deferred tax asset of $12 million in the balance sheet. 
D) None of these answer choices are correct.

Question 2

Use the following to answer questions 
The following information relates to Franklin Freightways for its first year of operations (data in millions of dollars):
  The applicable tax rate is 40%.There are no other temporary or permanent differences.
-Franklin Freightways experienced ($ in millions)a current:

Accepted Answer

A) Tax liability of $66. 
B) Tax liability of $36. 
C) Tax liability of $70.6. 
D) Tax benefit of $10 due to the NOL.

Question 3

Changes in enacted tax rates only affect income tax expense in the years those changes affect tax payable.

Accepted Answer

A) True 
 B)False

Question 4

Suppose that,in 2017,legislation revised the income tax rates so that Isaac would be taxed in 2018 and beyond at 40%,rather than 30%.Assume that there were no other differences in income for financial statement and tax purposes.Ignoring operating expenses and additional sales in 2017,what deferred tax liability would Isaac report in its year-end 2017 balance sheet?

Accepted Answer

A) $168 million 
B) $144 million 
C) $126 million 
D) $240 million.

Question 5

Which of the following would never require reporting deferred tax assets or deferred tax liabilities?

Accepted Answer

A) Depreciation on equipment. 
B) Accrual of warranty expense. 
C) Life insurance premiums for the payer's benefit. 
D) Rent revenue received in advance.

Question 6

Valuation allowances reduce deferred tax liabilities to the amount that is more likely than not to be payable in the future.

Accepted Answer

A) True 
 B)False

Question 7

Reliable Corp.had a pretax accounting income of $30 million this year.This included the collection of $40 million of life insurance proceeds when several key executives died in a plane crash.Temporary differences for the current year netted out to zero.Reliable has had a 40% tax rate and taxable income of $120 million over the previous two years and plans to elect a net operating loss carryback for tax purposes.In the current year financial statements,Reliable would report:

Accepted Answer

A) Net income of $34 million. 
B) A tax benefit of $10 million. 
C) Net income of $26 million. 
D) A deferred tax asset of $4 million.

Question 8

Use the following to answer questions 
Puritan Corp.reported the following pretax accounting income and taxable income for its first three years of operations:
  Puritan's tax rate is 40% for all years.Puritan elected a loss carryback.
As of December 31,2016.Puritan was certain that it would recover the full tax benefit of the
NOL that remained after the operating loss carryback.
-What would Puritan report as net income for 2017?

Accepted Answer

A) $620,000. 
B) $420,000. 
C) $270,000. 
D) $460,000.

Question 9

MACRS depreciation typically creates deferred tax liabilities early in the life of an asset.

Accepted Answer

A) True 
 B)False

Question 10

The Bell Company had the following operating results:
Year Income (loss)Tax rate Income tax
2013 40,000 35% 14,000
2014 20,000 35% 7,000
2015 50,000 40% 20,000
2016 (60,000)40% 0
What is the income tax refund receivable?

Accepted Answer

A) $27,000. 
B) $24,000. 
C) $23,000. 
D) $21,000.

Question 11

Using straight-line depreciation for financial reporting purposes and MACRS for tax purposes in the first year of an asset's life creates a:

Accepted Answer

A) Future deductible amount. 
B) Permanent difference not requiring inter-period tax allocation. 
C) Deferred tax asset. 
D) Deferred tax liability.

Question 12

Which of the following differences between financial accounting and tax accounting ordinarily creates a deferred tax asset?

Accepted Answer

A) Depreciation early in the life of an asset. 
B) Unrealized gain from recording investments at fair value. 
C) Subscriptions collected in advance. 
D) None of these answer choices are correct.

Question 13

How are deferred tax assets and deferred tax liabilities reported in a classified balance sheet?

Accepted Answer

The answer of How are deferred tax assets and deferred...

Question 14

Roberts Corp.reports pretax accounting income of $200,000,but due to a single temporary difference,taxable income is only $150,000.At the beginning of the year,no temporary differences existed.Roberts is subject to a tax rate of 40%.
Required:
Prepare the compound journal entry to record Roberts Corp.'s income taxes.Show well-labeled computations.

Accepted Answer

The answer of Roberts Corp.reports pretax accounting income of $200,000,but...

Question 15

Under current tax law a net operating loss may be carried forward up to:

Accepted Answer

A) 5 years. 
B) 10 years. 
C) 15 years. 
D) 20 years.

Question 16

A magazine publisher collects one year in advance for subscription revenue.In the year of providing the magazines to customers,the company would record:

Accepted Answer

A) An increase in a deferred tax asset. 
B) A decrease in a deferred tax asset. 
C) An increase in a deferred tax liability. 
D) A decrease in a deferred tax liability.

Question 17

Listed below are five independent situations.For each situation indicate (by letter)whether it will create (A)a deferred tax asset, (L)a deferred tax liability,or (N)neither.

Accepted Answer

The answer of Listed below are five independent situations.For each...

Question 18

If a company's deferred tax asset is not reduced by a valuation allowance,the company believes it is more likely than not that:

Accepted Answer

A) Sufficient accounting income will be generated in future years to realize the full tax benefit. 
B) Sufficient accounting and taxable income will exist in future years to realize the full tax benefit. 
C) Sufficient taxable income will be generated in future years to realize the full tax benefit. 
D) Tax rates will not change in future years.

Question 19

Use the following to answer questions 
The following information relates to Franklin Freightways for its first year of operations (data in millions of dollars):
  The applicable tax rate is 40%.There are no other temporary or permanent differences.
-Franklin's net income ($ in millions)is:

Accepted Answer

A) $134. 
B) $124. 
C) $119.4. 
D) $118.

Question 20

A net operating loss (NOL)carryforward cannot result in the balance sheet at the end of the NOL year showing:

Accepted Answer

A) A receivable under current assets for an income tax refund. 
B) A current deferred tax asset. 
C) A noncurrent deferred tax asset. 
D) Both a current and a noncurrent deferred tax asset.

Exam 16: Accounting for Income Taxes

How should Hobson report tax on the discontinued operation?

Changes in enacted tax rates only affect income tax expense in the years those changes affect tax payable.

Which of the following would never require reporting deferred tax assets or deferred tax liabilities?

Valuation allowances reduce deferred tax liabilities to the amount that is more likely than not to be payable in the future.

MACRS depreciation typically creates deferred tax liabilities early in the life of an asset.

The Bell Company had the following operating results: Year Income (loss) Tax rate Income tax 2013 40,000 35% 14,000 2014 20,000 35% 7,000 2015 50,000 40% 20,000 2016 (60,000) 40% 0 What is the income tax refund receivable?

Using straight-line depreciation for financial reporting purposes and MACRS for tax purposes in the first year of an asset's life creates a:

Which of the following differences between financial accounting and tax accounting ordinarily creates a deferred tax asset?

How are deferred tax assets and deferred tax liabilities reported in a classified balance sheet?

Under current tax law a net operating loss may be carried forward up to:

A magazine publisher collects one year in advance for subscription revenue.In the year of providing the magazines to customers,the company would record:

Listed below are five independent situations.For each situation indicate (by letter)whether it will create (A)a deferred tax asset, (L)a deferred tax liability,or (N)neither.

If a company's deferred tax asset is not reduced by a valuation allowance,the company believes it is more likely than not that:

Use the following to answer questions The following information relates to Franklin Freightways for its first year of operations (data in millions of dollars) : The applicable tax rate is 40%.There are no other temporary or permanent differences. -Franklin's net income ($ in millions) is:

A net operating loss (NOL) carryforward cannot result in the balance sheet at the end of the NOL year showing: