Determine the effect of the following item on the reconciliation of Net Income for Accounting Purposes to minimum Net Income for Tax Purposes (NIFTP). Additions in reconciliation should be entered in the box as a positive number (write only numbers, do not write "+" sign). Deductions in reconciliation should be entered in the box as a negative number. If the item would have no effect on the reconciliation, enter the number 0 (zero) in the box. Business Meals and Entertainment in the amount of $7,000 were deducted in the calculation of Net Income for Accounting Purposes. Your Answer:

Determine the effect of the following item on the reconciliation of Net Income for Accounting Purposes to minimum Net Income for Tax Purposes (NIFTP). Additions in reconciliation should be entered in the box as a positive number (write only numbers, do not write "+" sign). Deductions in reconciliation should be entered in the box as a negative number. If the item would have no effect on the reconciliation, enter the number 0 (zero) in the box. Business Meals and Entertainment in the amount of $7,000 were deducted in the calculation of Net Income for Accounting Purposes. Your Answer:

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter2: Gross Income And Exclusions

Section: Chapter Questions

Problem 1MCQ: The definition of gross income in the tax law is: All items specifically listed as income in the tax...

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What is the accounting treatment for discontinued operations? A : It is reported at its gross amount as an "other revenue or gain" or "other expense or loss". B : It is reported as an "other revenue or gain" or "other expense and loss", net of tax. C : It only needs to be disclosed in the footnotes of the financial statements. D : It may be treated as sales revenue (if it is a gain) and as an operating expense (if it is a loss).
The concept of materiality: a Treats as material only those items that are greater than 2% or 3% of net income. b Justifies ignoring the matching principle in certain circumstances. c Affects only items reported in the income statement. d Results in financial statements that are less useful to decision makers because many details have been omitted.
Classify the following items that may cause discrepancy between accounting profit and taxable income, into the following types of differences. Also, provide an explenation why that is their classification. A. Non-deductible expenses B. Non-taxable revenues C. Deductible temporary difference D. Taxable temporary difference Collections of rental in excess of rent revenue reported during the period. Dividends received by a domestic corporation from a domestic corporation. Increase in fair value of equity investments measured at fair value through profit or loss. Uncollectible accounts expense in excess of accounts written off during the period. Tax depreciation in excess of depreciation for accounting purposes.
Classify the following items that may cause discrepancy between accounting profit and taxable income, into the following types of differences. Also, provide an explenation why that is their classification. A. Non-deductible expenses B. Non-taxable revenues C. Deductible temporary difference D. Taxable temporary difference Collections of rental in excess of rent revenue reported during the period. Dividends received by a domestic corporation from a domestic corporation. Increase in fair value of equity investments measured at fair value through profit or loss.
Which of the following statements is correct? Options: • The net income would still be the same regardless of accounting method that is used whether cash basis or accrual basis • Pre-collections initially recorded as income will overstate the profit at the end of the accounting period if no adjustment is done for unearned portion • Deferral is intended to recognize income earned but not yet received • Accrual of expenses will increase the expense element and will correspondingly decrease the liability
Classify the following items that may cause discrepancy between accounting profit and taxable income, into the following types of differences. Also, provide an explenation why that is their classification. A. Non-deductible expenses B. Non-taxable revenues C. Deductible temporary difference D. Taxable temporary difference Interest earned on investments in tax-exempt government securities. Interest earned on deposits with bank. Excess of profit earned over the profit reported under the installment method for income tax purposes.
Which of the following accounts would not be involved in preparing the income statement? Group of answer choices Tax expense All the accounts would be involved in preparing the income statement. Interest income Accumulated depreciation Depreciation expense
Which of the following is not a criterion to recognize revenue under GAAP? A. The earnings process must be completed. B. A product or service must be provided. C. Cash must be collected. D. GAAP requires that the accrual basis accounting principle be used in the revenue recognition process.
The definition of gross income in the tax law is: All items specifically listed as income in the tax law All cash payments received for goods provided and services performed All income from whatever source derived All income from whatever source derived unless the income is earned illegally
Which statement is incorrect? *A.the FUNCTIONAL Income Statement classifies expenses into cost of sales, selling expenses and general administrative expenses, among others .b.Income encompasses both revenues and gains. Revenues arise in the ordinary course of business activities while gains are not. c.Expenses encompasses both expenses and losses. Losses usually comprise the majority amount of deductible expenses to arrive at taxable income. d.The statement of comprehensive income encompasses all income and expenses, whether they are recognized in profit or loss determination or recognized directly in equity. e.none of the above
Which statement is incorrect? A. The FUNCTIONAL Income Statement classifies expenses into cost of sales, selling expenses and general administrative expenses, among others. B. Income encompasses both revenues and gains. Revenues arise in the ordinary course of business activities while gains are not. C. Expenses encompasses both expenses and losses. Losses usually comprise the majority amount of deductible expenses to arrive at taxable income. D. The statement of comprehensive income encompasses all income and expenses, whether they are recognized in profit or loss determination or recognized directly in equity. E. none of the above
Question (3) Is entertainment expense likely to be reported differently on the business tax return than on the business financial statements? O Yes, entertainment expense is typically higher on the tax return. O Yes, entertainment expense is typically lower on the tax return. O No, entertainment expense is typically the same on both the tax return and the financial statements. Bookmark for review