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Exam 16: Accounting for Income Taxes

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Question 61

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The classification of deferred tax assets is sometimes dependent on when the benefit will be realized.

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B) False

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Question 62

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How are deferred tax assets arising from net operating loss carryforwards classified with regard to GAAP accounting for income taxes?

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Deferred tax assets that arise from a ne...

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Question 63

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Gore Company,organized on January 2,2016,had pretax accounting income of $7,000,000 and taxable income of $10,000,000 for the year ended December 31,2016.The 2016 tax rate was 40%.The only difference between book and taxable income is estimated warranty costs.Expected payments and scheduled enacted tax rates are as follows: Required: Prepare one compound journal entry to record Gore's provision for taxes for the year 2016.

A result of inter-period tax allocation is that:

In 2015,HD had reported a deferred tax asset of $90 million with no valuation allowance.At December 31,2016,the account balances of HD Services showed a deferred tax asset of $120 million before assessing the need for a valuation allowance and income taxes payable of $80 million.HD determined that it was more likely than not that 30% of the deferred tax asset ultimately would not be realized.HD made no estimated tax payments during 2016.What amount should HD report as income tax expense in its 2016 income statement?

Of the following temporary differences,which one ordinarily creates a deferred tax asset?

Of the following temporary differences,which one ordinarily creates a deferred tax asset?

In the statement of cash flows,by using the indirect method for determining cash flows from operating activities,a decrease in deferred tax liabilities is:

Pretax accounting income for the year ended December 31,2016,was $50 million for Truffles Company.Truffles' taxable income was $60 million.This was a result of differences between straight-line depreciation for financial reporting purposes and MACRS for tax purposes.The enacted tax rate is 30% for 2016 and 40% thereafter.What amount should Truffles report as the current portion of income tax expense for 2016?

For reporting purposes,current deferred tax assets and current deferred tax liabilities are:

Identify three examples of permanent differences between accounting income and taxable income.

Revenues from installment sales of property reported on financial statements in prior years and currently reported in the tax return create deferred tax assets.

What should be the balance in Kent's deferred tax liability account as of December 31,2016?

Listed below are 5 terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the most correct term.

Two independent situations are described below.Each involves future deductible amounts and/or future taxable amounts produced by temporary differences: The enacted tax rate is 40% for both situations. Required: For each situation determine the: (a. )Income tax payable currently. (b. )Deferred tax asset - balance at year-end. (c. )Deferred tax asset change dr or (cr)for the year. (d. )Deferred tax liability - balance at year-end. (e. )Deferred tax liability change dr or (cr)for the year. (f. )Income tax expense for the year.

What is the justification for a corporation determining income for financial reporting purposes differently than the way it is determined for tax purposes?

In the current year,Bruno Corporation collected rent of $3,600,000.For income tax reporting,the rent is taxed when collected.For financial reporting,the rent is recognized as income in the period earned.At the end of the current year,the unearned portion of the rent collected in the current year amounted to $400,000.Bruno had no temporary differences at the beginning of the current year.Assume an income tax rate of 30%. Required: The current year's income tax liability from the tax return is $800,000.Prepare the journal entry to record income taxes for the year.Show well-labeled computations.

In its first four years of operations Peridot Jewelers reported the following operating income (loss) amounts: There were no other deferred income taxes in any year.In 2015,Peridot elected to carry back its operating loss.The enacted income tax rate was 40%.In its 2016 income statement,what amount should Peridot report as income tax expense?

Ignoring operating expenses,what deferred tax liability would Isaac report in its year-end 2016 balance sheet?

The information that follows pertains to Julia Company: (a. )Temporary differences for the year 2016 are summarized below. Expenses deducted in the tax return,but not included in the income statement: Depreciation $60,000 Prepaid expense 8,000 Expenses reported in the income statement,but not deducted in the tax return: Warranty expense 9,000 (b. )No temporary differences existed at the beginning of 2016. (c. )Pretax accounting income was $67,000 and taxable income was $8,000 for 2016. (d. )There were no permanent differences. (e. )The tax rate is 30%. Required: Prepare the journal entry to record the tax provision for 2016.Provide supporting computations.