Question 1

A firm is not required to reconcile the federal statutory tax rate to its effective tax rate.

Accepted Answer

A) True 
 B)False

Question 2

Under U.S.GAAP,companies generally use a cash flow approach to account for temporary differences between book and tax treatment of transactions.

Accepted Answer

A) True 
 B)False

Question 3

Lyon Group's income before taxes is $450,000 and its tax rate is 30%.Lyon included $30,000 in fines and penalties in the $450,000.There are no other book-tax differences.What is the income tax liability for Lyon Group?

Accepted Answer

A) $135,000 
B) $144,000 
C) $126,000 
D) $141,000

Question 4

Tetra Corp.recorded book income of $225,000 in 2015.It does not have any permanent differences and the only temporary difference relates to $45,000 unearned income that it recorded for book purposes.Tetra anticipates satisfying this liability equally over the following three years.The current enacted tax rate is 38%.The enacted tax rates for the following three years are 35%,40%,and 45%,respectively.Under U.S.GAAP,what deferred tax amount should Tetra Corp.record for this temporary difference?

Accepted Answer

A) $16,950 
B) $17,100 
C) $18,000 
D) $20,250

Question 5

Danio Inc.'s income before taxes is $350,000 and its tax rate is 30%.Danio included $20,000 of interest from municipal bonds in the $350,000.There are no other book-tax differences.What is the effective tax rate for Danio Inc.?

Accepted Answer

A) 26% 
B) 28% 
C) 30% 
D) 32%

Question 6

Under IFRS,the balance sheet presentation for deferred taxes is to report them as either current or non-current.

Accepted Answer

A) True 
 B)False

Question 7

Illusions Inc.just completed its second year of operations and has a deferred tax asset of $47,500 related to a net operating loss of $125,000 from the previous year.In the current year Illusions generates $400,000 in revenues and incurs $250,000 in expenses.There are no permanent or temporary book-tax differences.Assuming the same tax rate as last year,what amount will Illusions record for Income Tax Payable in the current year?

Accepted Answer

A) $9,500 
B) $57,000 
C) $152,000 
D) Cannot be determined from the information provided.

Question 8

Accounting for uncertain tax positions under U.S.GAAP involves a two step approach: ________.

Accepted Answer

A) measurement and classification 
B) recognition and qualification 
C) classification and computation 
D) recognition and measurement

Question 9

Refer to Kraviz Corporation.What is the net amount of Kravitz' book-tax difference?

Accepted Answer

A) Book income that is $50,000 greater than taxable income 
B) Book income that is $60,000 greater than taxable income 
C) Taxable income that is $10,000 greater than book income 
D) Taxable income that is $50,000 greater than book income

Question 10

Refer to Sonic Speaker Company.What is the largest amount of tax benefit allowed?

Accepted Answer

A) $106,400 
B) $152,000 
C) $66,500 
D) $142,500

Question 11

Lyon Ltd.,a U.S.GAAP reporter,provides the following information:
Sales on account $800,000
Associated warranty expense/liability $200,000
No warranty repairs made to date; under law - Lyon cannot deduct warranty expense for tax purposes until repairs are made.
Management estimates that it is more likely than not that the firm will not realize 25% of the deferred tax asset.
Tax rate of 35%
Prepare a simplified income statement,including the effective tax rate,both with and without the valuation allowance.

Accepted Answer

The answer of Lyon Ltd.,a U.S.GAAP reporter,provides the following information:
Sales...

Question 12

When a company adjusts the balance of a deferred tax account to reflect changes in the tax rate,prior-period financial statements will need to be adjusted to reflect this.

Accepted Answer

A) True 
 B)False

Question 13

The contra-asset to the deferred tax asset account is called ________.

Accepted Answer

A) income tax benefit 
B) valuation allowance 
C) deferred tax liability 
D) allowance for doubtful accounts

Question 14

There are questions as to whether or not deferred tax assets and liabilities should be recorded.Based on your understanding of the concepts and accounting terminology - are deferred tax assets and tax liabilities real assets and liabilities?

Accepted Answer

The answer of There are questions as to whether or...

Question 15

The effective tax rate is the legally imposed rate in a given taxing jurisdiction.

Accepted Answer

A) True 
 B)False

Question 16

Greene Co.has book income of $425,000,and a tax rate of 30%.Assuming there is no book-tax income difference,what will the journal entry be to record the income tax expense?

Accepted Answer

A)   
B)   
C)   
D)

Question 17

When defining the portion of a deferred tax asset that a firm will not realize,IFRS uses the term ________.

Accepted Answer

A) likely 
B) possible 
C) more likely than not 
D) probable

Question 18

Under GAAP,the balance sheet presentation for deferred taxes is to report them as either current or non-current.

Accepted Answer

A) True 
 B)False

Question 19

TNT Corporation's income tax payable is $210,000 and its tax rate is 35%.Assuming no book-tax income difference,what is TNT's net income?

Accepted Answer

A) $73,500 
B) $210,000 
C) $600,000 
D) $323,076

Question 20

What purpose does a carryback or carryforward serve to a company with a volatile earnings stream?

Accepted Answer

The answer of What purpose does a carryback or carryforward...

Exam 19: Accounting for Income Taxes

A firm is not required to reconcile the federal statutory tax rate to its effective tax rate.

Under U.S.GAAP,companies generally use a cash flow approach to account for temporary differences between book and tax treatment of transactions.

Lyon Group's income before taxes is $450,000 and its tax rate is 30%.Lyon included $30,000 in fines and penalties in the $450,000.There are no other book-tax differences.What is the income tax liability for Lyon Group?

Danio Inc.'s income before taxes is $350,000 and its tax rate is 30%.Danio included $20,000 of interest from municipal bonds in the $350,000.There are no other book-tax differences.What is the effective tax rate for Danio Inc.?

Under IFRS,the balance sheet presentation for deferred taxes is to report them as either current or non-current.

Accounting for uncertain tax positions under U.S.GAAP involves a two step approach: ________.

Refer to Kraviz Corporation.What is the net amount of Kravitz' book-tax difference?

Refer to Sonic Speaker Company.What is the largest amount of tax benefit allowed?

When a company adjusts the balance of a deferred tax account to reflect changes in the tax rate,prior-period financial statements will need to be adjusted to reflect this.

The contra-asset to the deferred tax asset account is called ________.

There are questions as to whether or not deferred tax assets and liabilities should be recorded.Based on your understanding of the concepts and accounting terminology - are deferred tax assets and tax liabilities real assets and liabilities?

The effective tax rate is the legally imposed rate in a given taxing jurisdiction.

Greene Co.has book income of $425,000,and a tax rate of 30%.Assuming there is no book-tax income difference,what will the journal entry be to record the income tax expense?

When defining the portion of a deferred tax asset that a firm will not realize,IFRS uses the term ________.

Under GAAP,the balance sheet presentation for deferred taxes is to report them as either current or non-current.

TNT Corporation's income tax payable is $210,000 and its tax rate is 35%.Assuming no book-tax income difference,what is TNT's net income?

What purpose does a carryback or carryforward serve to a company with a volatile earnings stream?