FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Transcribed Image Text:I. TRUE OR FALSE.
1. The amount of tax expense reported in the income statement represents the amount
of tax to be paid to the BIR.
2. Income tax expense is the sum of
current
tax expense and deferred tax expense
(benefit).
3. Timing
differences
include
all
temporary
differences,
but
all
timing
not
differences are temporary differences.
4. Nontaxable income results to a temporary difference.
5. Income tax expense is increased when a deferred tax liability reverses.
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- 1continue.. Listed below are items that are commonly accounted for differently for financial reporting purposes than they are for tax purposes.For each item below, indicate whether it involves: 1. A temporary difference that will result in future deductible amounts and, therefore, will usually give rise to a deferred income tax asset. 2. A temporary difference that will result in future taxable amounts and, therefore, will usually give rise to a deferred income tax liability. 3. A permanent difference. (e) Installment sales of investments are accounted for by the accrual method for financial reporting purposes and the installment method for tax purposes. (f) For some assets, straight-line depreciation is used for both financial reporting purposes and tax purposes, but the assets’ lives are shorter for tax purposes. (g)…arrow_forwardTax rates other than the current tax rate may be used to calculate the deferred income tax amount for financial statement reporting if O it is probable that a future tax rate change will occur. O it appears likely that a future tax rate will be greater than the current tax rate. O it appears likely that a future tax rate will be less than the current tax rate. O the enacted tax rate is expected to apply in future years.arrow_forwardA deferred tax account is classified on the balance sheet as: A net noncurrent amount A net current amount It should never appear on the balance sheet Either a current or a noncurrent liabilityarrow_forward
- If the valuation allowance for a deferred tax asset is decreased, there is a(n) ________ to income tax expense, which is a(n) ________ to income tax benefit. Group of answer choices increase; decrease increase; increase decrease; decrease decrease; increasearrow_forwardOf the following temporary differences, which one ordinarily creates a deferred tax asset? O Installment sales for tax reporting. O Fines paid for violation of law. O Prepaid expenses. O Estimated warranty expense.arrow_forwardA temporary difference which would result in a deferred tax liability is a) installment sale included in accounting income at the time of sale but not in tax incomeb) subscription received in advancec) research cost is recognized as expense in accounting income but not in tax incomed) Dividend revenue on equity investmentarrow_forward
- 2arrow_forwardExpenditures currently deducted in the tax return but not included with expenses in the income statement until subsequent years create deferred tax liabilities. O True O Falsearrow_forwardAn unused tax loss will arise when: a. Expenses deductible for tax purposes are less than the taxable income b. Expenses deductible for tax purposes exceeds the taxable income. c. Expenses deductible for tax purposes are equal to the taxable income d. Expenses deductible for tax purposes do not exist.arrow_forward
- 1 contiune Listed below are items that are commonly accounted for differently for financial reporting purposes than they are for tax purposes.For each item below, indicate whether it involves: 1. A temporary difference that will result in future deductible amounts and, therefore, will usually give rise to a deferred income tax asset. 2. A temporary difference that will result in future taxable amounts and, therefore, will usually give rise to a deferred income tax liability. 3. A permanent difference. (e) Installment sales of investments are accounted for by the accrual method for financial reporting purposes and the installment method for tax purposes.(f) For some assets, straight-line depreciation is used for both financial reporting purposes and tax purposes, but the assets’ lives are shorter for tax purposes.(g)…arrow_forwardSome items are treated as a deduction for tax purposes when they are paid but are recognised as expenses when they are accrued for accounting purposes. Which of the following items are of that type? a. Warranty costs b. Goodwill impairment c. Fines d. Entertainment expenses e. Prepaid insurancearrow_forwardValuation allowances reduce deferred tax liabilities to the amount that is more likely than not to be payable in the future. O True Falsearrow_forward
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