FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 6: Accounting for Income Taxes

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

Multiple Choice

Review LaterAdd Note

Review Later

Which of the following items is not a temporary difference?

A) Vacation pay accrued for tax purposes in a prior period is deducted in the current period.
B) Tax depreciation for the period exceeds book depreciation.
C) A goodwill impairment expense is recorded on the income statement; the goodwill did not have a tax basis when it was created.
D) Bad debts charged off in the current period exceed the bad debts accrued in the current period.

E) A) and B)
F) A) and C)

Correct Answer

verified

Show Answer

Question 42

Multiple Choice

Review LaterAdd Note

Review Later

A valuation allowance is recorded against a deferred tax asset when:

A) It is probable that the deferred tax asset will not be realized in the future.
B) It is more likely than not that the deferred tax asset will not be realized in the future.
C) It is highly likely the deferred tax asset will not be realized in the future.
D) It is remote the deferred tax asset will not be realized in the future.

E) A) and B)
F) A) and C)

Correct Answer

verified

Show Answer

Question 43

Multiple Choice

Review LaterAdd Note

Swordfish Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $25,000. In addition, book depreciation exceeded tax depreciation by $100,000. In prior years, tax depreciation exceeded book depreciation by a cumulative amount of $500,000. Finally, Swordfish subtracted a dividends received deduction of $15,000 in computing its current year taxable income. Swordfish's deferred income tax expense or benefit would be:

ASC 740 applies a two-step process in determining if an uncertain tax benefit should be recognized.

Tax-exempt interest from municipal bonds is an example of a permanent book to tax difference.

Jones Company reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000, unfavorable temporary differences of $20,000, and favorable permanent differences of $40,000. Book equivalent of taxable income is:

A valuation allowance can reduce both a deferred tax asset and a deferred tax liability.

A corporation's effective tax rate as computed in its income tax note is the company's cash tax rate for the year.

TarHeel Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $100,000. In addition, tax depreciation exceeded book depreciation by $200,000. Finally, TarHeel subtracted a dividends received deduction of $50,000 in computing its current year taxable income. TarHeel's accounting effective tax rate is:

Which of the following statements is True?

The Emerging Issues Task Force assists the FASB by providing guidance on the implementation of ASC 740 and other accounting pronouncements.

Packard Corporation reported pretax book income of $500,000. Included in the computation were favorable temporary differences of $10,000, unfavorable temporary differences of $100,000, and unfavorable permanent differences of $80,000. The corporation's current income tax expense or benefit would be:

Which of the following groups does not issue rules that apply to accounting for income taxes?

Weaver Company had a net deferred tax liability of $34,000 at the beginning of the year, representing a net taxable temporary difference of $100,000 (taxed at 34%) . During the year, Weaver reported pretax book income of $400,000. Included in the computation were favorable temporary differences of $50,000 and unfavorable temporary differences of $20,000. At the beginning of the year, Congress reduced the corporate tax rate to 21%. Weaver's deferred income tax expense or benefit for the current year would be:

Purple Rose Corporation reported pretax book income of $500,000. Tax depreciation exceeded book depreciation by $300,000. In addition, the company received $250,000 of tax-exempt life insurance proceeds. The prior year tax return showed taxable income of $100,000. Compute Purple Rose's current income tax expense or benefit. 

Which of the following temporary differences creates a deferred tax asset in the year in which it originates?

A cumulative financial accounting (book) loss over three years likely would be considered significant negative evidence in a valuation allowance analysis.

Which of the following taxes would not be accounted for under ASC 740?

ASC 740 requires a publicly traded company to disclose the components of its deferred tax assets and liabilities only if the amounts are considered to be:

Oriole Company reported pretax net income from continuing operations of $1,000,000 and taxable income of $1,200,000. The unfavorable book-tax difference of $200,000 was due to a $200,000 favorable temporary difference relating to depreciation, an unfavorable temporary difference of $300,000 due to an increase in the reserve for bad debts, and a $100,000 unfavorable permanent difference from the disallowance of compensation expense related to the exercise of incentive stock options. a. Compute Oriole's current income tax expense. b. Compute Oriole's deferred income tax expense or benefit. c. Compute Oriole's effective tax rate. d. Provide a reconciliation of Oriole's effective tax rate with its hypothetical tax rate of 21%.