1. The amount of income taxes that relate to financial income subject to tax is reported on the income statement as A. long-term deferred income taxes (credit) C. income tax expense B. current deferred income taxes (debit) D. income tax payable 2. An item that would create a permanent difference in pretax financial and taxable income would be A. using accelerated depreciation for tax purposes & straight line depreciation for book purposes. B. using the percentage of completion method on long-tem construction contracts. C. purchasing equipment previously leased with an operating lease in prior years. D. paying fines for violation of laws. 3. Which of the following is the most likely item to result in a deferred tax asset? A. using completed contract method of recognizing construction revenue tax purposes, but using percentage of completion method for financial reporting purposes. B. using accelerated depreciation for tax purposes but straight-line depreciation for accounting purposes. C. unearned revenues D. prepaid expenses.

1. The amount of income taxes that relate to financial income subject to tax is reported on the income statement as A. long-term deferred income taxes (credit) C. income tax expense B. current deferred income taxes (debit) D. income tax payable 2. An item that would create a permanent difference in pretax financial and taxable income would be A. using accelerated depreciation for tax purposes & straight line depreciation for book purposes. B. using the percentage of completion method on long-tem construction contracts. C. purchasing equipment previously leased with an operating lease in prior years. D. paying fines for violation of laws. 3. Which of the following is the most likely item to result in a deferred tax asset? A. using completed contract method of recognizing construction revenue tax purposes, but using percentage of completion method for financial reporting purposes. B. using accelerated depreciation for tax purposes but straight-line depreciation for accounting purposes. C. unearned revenues D. prepaid expenses.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter18: Accounting For Income Taxes

Section: Chapter Questions

Problem 1P: Definitions The FASB has defined several terms in regard to accounting for income taxes. Below are...

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Definitions The FASB has defined several terms in regard to accounting for income taxes. Below are various code letters (for terms) followed by definitions. Code Letter Term Code Letter Term A. Future deductible amount H Deferred tax consequences B Income tax payable (or refund) I Future taxable amount Operating loss carryback Deferred tax liability D Valuation allowance K Temporary difference E Deferred tax asset Income tax expense (or benefit) F Operating loss carryforward M Deferred tax expense (or benefit) Taxable income Required: Indicate which term belongs with each definition by choosing the correct term. 1. The deferred tax consequences of future deductible amounts and operating loss carryforwards 2. A difference between the tax basis of an asset or liability and its reported amount in the financial statements that will result in taxable or deductible amounts in future years when the reported amount of the asset or liability is recovered or settled, respectively X 3. Temporary…
Which of the following items isreported net of related income taxes?a. Gain or loss from discontinued operations.b. Gain or loss from disposal of property, plant, andequipment.c. Interest on long-term debt.d. Gain or loss from early extinguishment of debt.
1. In computing the CURRENT tax asset or CURRENT tax liability, which tax rate is used? a. Current tax rate b. Future enacted tax rate c. Average tax rate d. Effective tax rate 2. In computing the DEFERRED tax asset or liability, which tax rate is used? a. Current tax rate b. Estimated future tax rate c. Enacted future tax rate d. Prior tax rate 3. It is the sum of the amount of income tax payable and deferred tax liability related to accounting income. a. Tax expense reported in the income statement b. Current tax expense c. Deferred tax expense d. Deferred tax benefit
After tax cost of interest deals with the fact that interest is deductible for tax purposes. Therefore, the after-tax cost of interest is calculated by, A. Calculating the income tax of a corporation before depreciation B. Comparing interest to net income C. Interest expense times (1- tax rate) D. Interest expense times the tax rate
Accounting profit is O A. The The profit or loss is for a period determined before deducting in accordance tax expense O B. The profit or loss is for a period determined in accordance with tax law C. The profit or loss after for a period after deducting tax expense O D. The profit or loss after current tax expense determined accordance with tax law
Which of the following is deducted from the financial income in computing for the taxable income? Excess of accounting depreciation from the allowed tax deduction Donations received during the year Penalties paid for late filing of tax returns Unrealized losses from FA@FVTOCI
1. Which statement is true about intraperiod tax allocation? a. It arises because certain revenue and expense items appear in the income statement either before or after they are included in the tax return b. It is required for the cumulative effect of accounting changes but not for prick period adjustments c. The purpose is to allocate income tax expense evenly over a number of accounting periods d. The purpose is to relate the income tax expense to the items which affect the amount of tax 2. Which temporary difference would result in a deferred tax asset? a. Tax penalty or surcharge b. Dividend received on share investment c. Excess tax depreciation over accounting depreciation d. Rent received in advance included in taxable income but deferred for financial accounting 3. Which temporary difference would result in a deferred tax liability? a. Interest revenue on municipal bonds b. Accrual of warranty expense c. Excess tax depreciation over…
A purpose of an adjustment to income is to (option: a.reduce gross income? b. help determine gross income? c. reduce tax owed after tax has been determined?). Another purpose of an adjustment to income is to (option: a. help determine adjusted gross income? b. calculate taxable income after agi has been determined? c. be subtracted after agi to help determine taxable income?)
(G.) An increase in the Deferred Tax Liability account on the balance sheet is recorded by a ____________ to the Income Tax Expense account. (debit / credit) (H.) An income statement that reports current tax expense of $85,200 and deferred tax benefit of $23,400 will report total income tax expense of $___________. (I.) A valuation account is needed whenever it is judged to be ____________ that a portion of a deferred tax asset ______________ realized. (more likely than not / equally likely ; will be / will not be) (J.) If the tax return shows total taxes due for the period of $75,800 but the income statement shows total income tax expense of $54,900, the difference of $20,900 is referred to as deferred tax _____________. (expense / benefit)
Sales tax payable, accounts payable, payroll liabilities and unearned revenue are all examples of: Group of answer choices long-term liabilities unknown liabilities current assets current liabilities
1.Whatare the conditions under Income Tax Act, ACT 896 forexpenditure to be allowed as a deduction when computingbusiness, employment or investment income?2.List5 allowable deductions from the assessable income3.Assumethat the written down value of assets in the pool 2 isGH 100 000 and the repairs and improvements is GH 20 000What will be the tax allowable expenses?4.Giventhat the assessable income for the company isGH 140 000 the finance cost is GH 90 000 and there is nocorresponding finance gain, what is the allowable expense?
PROBLEM 3: EXERCISES 1. Park Co. has the following information for the current year: Pretax income 900,000 Penalty on late filing of income tax return Interest on borrowings incurred to acquire tax- 30,000 exempt securities Interest income on government securities Excess of tax depreciation over book depreciation Excess of revenue recognized over taxable income Excess of provision over actual expenditures Advanced rent received (taxable upon receipt) Unrealized loss on change in fair value of investment Temporary differences as at the beginning of the year 3,000 9,000 60,000 45,000 54,000 12,000 18,000 Income tax rate 30%