Question 1

Under the comprehensive deferred interperiod method of tax allocation, deferred taxes are determined on the basis of

Accepted Answer

A)   Tax rates in effect when the timing differences originate without adjustment for subsequent changes in tax rates
B)   Tax rates expected to be in effect when the items giving rise to the timing differences reverse themselves
C)   Net valuations of assets or liabilities
D)   Averages determined on an industry-by-industry basisE) A) and D)
F) None of the above

Question 2

A deferred tax asset represents a

Accepted Answer

A)   Future tax expense
B)   Future tax liability.
C)   Future tax benefit
D)   Future taxable amountE) None of the above
F) B) and C)

Question 3

Which of the following will result in a deferred tax asset?

Accepted Answer

A)   Using the installment sales method for tax purposes, while using point of sale for financial reporting.
B)   Reporting an unrealized gain for a trading security.
C)   Using accelerated depreciation for tax purposes and straight-line depreciation for financial reporting.
D)   Reporting an expected loss on from a lawsuit in the income statement, when it cannot be reported on the tax return until it is actually incurred.E) A) and B)
F) A) and C) D

Question 4

A net operating loss:

Accepted Answer

A)   Must always be carried back 2 years
B)   Occurs when a company reports a net loss in their income statement
C)   May be carried forward indefinitely
D)   Must always be carried forward 20 yearsE) A) and B)
F) A) and C)

Question 5

A company's only temporary difference results from using double declining balance depreciation for tax purposes and straight-line depreciation for financial reporting. The company purchases new plant assets each year. If currently enacted tax law will result in a higher tax rate for all future tax years, which accounting approach for deferred taxes will result in the lowest net income for this current year?

Accepted Answer

A)   Nonallocation of deferred taxes.
B)   Partial allocation of deferred taxes under the asset/liability method.
C)   Comprehensive allocation of deferred taxes under the asset/liability method.
D)   Comprehensive allocation of deferred taxes under the deferred method.E) A) and B)
F) All of the above

Question 6

Describe the use of the valuation allowance for deferred tax assets.

Accepted Answer

The deferred tax asset measures potentia...

Question 7

Define the following types of differences between financial accounting income and taxable income:
a. Temporary
b. Permanent

Accepted Answer

a. Temporary
Most temporary differences ...

Question 8

Which of the following approaches to interperiod tax allocation best represents an example of the matching principle?

Accepted Answer

A)   The deferred method of interperiod income tax allocation
B)   Discounting deferred income taxes
C)   Nonallocation of income taxes
D)   The asset/liability method of income tax allocation.E) B) and C)
F) A) and B)

Question 9

Taxable income of a corporation differs from pretax financial income because of 
permanent Differences     Temporary Differences

Accepted Answer

A)  	     No 				Yes 
B)  	     Yes 				Yes  
C)  	      No 				 No 
D)  	     Yes 				 No E) A) and D)
F) A) and C) B

Question 10

Which of the following is a permanent difference?

Accepted Answer

A)   Product warranty liabilities
B)   Installment sales accounted for on an accrual basis
C)   Deductible pension funding exceeding expense
D)   Interest received on state and municipal obligationsE) A) and C)
F) A) and B)

Question 11

Differences between taxable income and pretax accounting income arising from transactions that, under applicable tax laws and regulations, will not be offset by corresponding differences or "turn around" in future periods is a definition of

Accepted Answer

A)   Permanent differences
B)   Timing differences
C)   Intraperiod tax allocation
D)   Interperiod tax allocationE) A) and D)
F) A) and C)

Question 12

An increase in the deferred income tax asset valuation allowance

Accepted Answer

A)   Occurs when there is an operating loss carryforward.
B)   Has no effect on income tax expense.
C)   Occurs when there is an expected increase in future taxable income.
D)   Increases income tax expense.E) B) and C)
F) A) and D)

Question 13

Describe accounting for uncertain tax positions under FIN No. 48, now FASB ASC 740-10-25.

Accepted Answer

The validity of a tax position is a matt...

Question 14

How is the earnings conservatism ratio calculated? Discuss the rationale behind the calculation of a company's earnings conservatism ratio.

Accepted Answer

The earnings conservatism ratio is calcu...

Question 15

Which of the following will result in a deferred tax liability?

Accepted Answer

A)   A net operating loss carryover.
B)   Reporting an unrealized gain for a trading security.
C)   Reporting an unrealized gain for an available-for-sale security.
D)   Reporting an expected loss on from a lawsuit in the income statement, when it cannot be reported on the tax return until it is actually incurred.E) All of the above
F) None of the above

Question 16

Which of the following causes a permanent difference between taxable income and financial accounting income?

Accepted Answer

A)   The useful life of an asset is 10 years. The asset is depreciated over 7 years for tax purposes.
B)   Rent received in advance is taxable upon receipt.
C)   A life insurance premium paid by the corporation on a policy that names the corporation as the beneficiary.
D)   A penalty paid to a bank when a CD is cashed before its maturity date.E) A) and B)
F) A) and C)

Question 17

The accounting recognition of the benefit from a tax loss carryforward in most situations should be reported as

Accepted Answer

A)   A reduction of the loss in the year of the loss with an appropriate valuation allowance
B)   A prior period adjustment in whichever year the benefit is realized
C)   As a component of income from continuing operations in the year in which the benefit is realized
D)   An item on the retained earnings statement, not the income statementE) A) and B)
F) None of the above

Question 18

Which of the following is an argument that an advocate of interperiod income tax allocation might use to support his/her position?

Accepted Answer

A)   Income taxes result from taxable income.
B)   Income taxes are an expense of doing business and should be treated the same as other expenses of doing business under accrual accounting.
C)   Nonallocation of income taxes hides an economic difference between a company that employs tax strategies that reduce current tax payments than one that does not.
D)   Income taxes are not incurred in anticipation of future benefits, nor are they expirations of cost to provide facilities to generate revenues.E) None of the above
F) C) and D)

Question 19

Assuming no prior period adjustments, would the following affect net income?
Interperiod Income tax Allocation            Intraperiod Income tax Allocation

Accepted Answer

A)  	                                    Yes				        Yes
B)  	                                    Yes				         No
C)  	                                     No				        Yes
D)  	                                      No                                                      NoE) A) and B)
F) A) and C) B

Question 20

Intraperiod tax allocation arises because

Accepted Answer

A)   Items included in the determination of taxable income may be presented in different sections of the financial statements
B)   Income taxes must be allocated between current and future periods
C)   Certain revenues and expenses appear in the financial statements either before or after they are included in taxable income
D)   Certain revenues and expenses appear in the financial statements but are excluded from taxable incomeE) B) and C)
F) A) and B)

Exam 12: Accounting for Income Taxes

Under the comprehensive deferred interperiod method of tax allocation, deferred taxes are determined on the basis of

Correct Answer
verified

A deferred tax asset represents a

Correct Answer
verified

Which of the following will result in a deferred tax asset?

Correct Answer
verified
D

A net operating loss:

Correct Answer
verified

Correct Answer
verified

Describe the use of the valuation allowance for deferred tax assets.

Correct Answer
verified
The deferred tax asset measures potentia...
View Answer

Define the following types of differences between financial accounting income and taxable income: a. Temporary b. Permanent

Correct Answer
verified
a. Temporary
Most temporary differences ...
View Answer

Which of the following approaches to interperiod tax allocation best represents an example of the matching principle?

Correct Answer
verified

Taxable income of a corporation differs from pretax financial income because of permanent Differences Temporary Differences

Correct Answer
verified
B

Which of the following is a permanent difference?

Correct Answer
verified

Differences between taxable income and pretax accounting income arising from transactions that, under applicable tax laws and regulations, will not be offset by corresponding differences or "turn around" in future periods is a definition of

Correct Answer
verified

An increase in the deferred income tax asset valuation allowance

Correct Answer
verified

Describe accounting for uncertain tax positions under FIN No. 48, now FASB ASC 740-10-25.

Correct Answer
verified
The validity of a tax position is a matt...
View Answer

How is the earnings conservatism ratio calculated? Discuss the rationale behind the calculation of a company's earnings conservatism ratio.

Correct Answer
verified
The earnings conservatism ratio is calcu...
View Answer

Which of the following will result in a deferred tax liability?

Correct Answer
verified

Which of the following causes a permanent difference between taxable income and financial accounting income?

Correct Answer
verified

The accounting recognition of the benefit from a tax loss carryforward in most situations should be reported as

Correct Answer
verified

Which of the following is an argument that an advocate of interperiod income tax allocation might use to support his/her position?

Correct Answer
verified

Assuming no prior period adjustments, would the following affect net income? Interperiod Income tax Allocation Intraperiod Income tax Allocation

Correct Answer
verified
B

Intraperiod tax allocation arises because

Correct Answer
verified

Exam 12: Accounting for Income Taxes

Under the comprehensive deferred interperiod method of tax allocation, deferred taxes are determined on the basis of

Correct AnswerverifiedShow Answer

A deferred tax asset represents a

Correct AnswerverifiedShow Answer

Which of the following will result in a deferred tax asset?

Correct AnswerverifiedD

A net operating loss:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Describe the use of the valuation allowance for deferred tax assets.

Correct AnswerverifiedThe deferred tax asset measures potentia...View AnswerShow Answer

Define the following types of differences between financial accounting income and taxable income: a. Temporary b. Permanent

Correct Answerverifieda. TemporaryMost temporary differences ...View AnswerShow Answer

Which of the following approaches to interperiod tax allocation best represents an example of the matching principle?

Correct AnswerverifiedShow Answer

Taxable income of a corporation differs from pretax financial income because of permanent Differences Temporary Differences

Correct AnswerverifiedB

Which of the following is a permanent difference?

Correct AnswerverifiedShow Answer

Differences between taxable income and pretax accounting income arising from transactions that, under applicable tax laws and regulations, will not be offset by corresponding differences or "turn around" in future periods is a definition of

Correct AnswerverifiedShow Answer

An increase in the deferred income tax asset valuation allowance

Correct AnswerverifiedShow Answer

Describe accounting for uncertain tax positions under FIN No. 48, now FASB ASC 740-10-25.

Correct AnswerverifiedThe validity of a tax position is a matt...View AnswerShow Answer

How is the earnings conservatism ratio calculated? Discuss the rationale behind the calculation of a company's earnings conservatism ratio.

Correct AnswerverifiedThe earnings conservatism ratio is calcu...View AnswerShow Answer

Which of the following will result in a deferred tax liability?

Correct AnswerverifiedShow Answer

Which of the following causes a permanent difference between taxable income and financial accounting income?

Correct AnswerverifiedShow Answer

The accounting recognition of the benefit from a tax loss carryforward in most situations should be reported as

Correct AnswerverifiedShow Answer

Which of the following is an argument that an advocate of interperiod income tax allocation might use to support his/her position?

Correct AnswerverifiedShow Answer

Assuming no prior period adjustments, would the following affect net income? Interperiod Income tax Allocation Intraperiod Income tax Allocation

Correct AnswerverifiedB

Intraperiod tax allocation arises because

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
D

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The deferred tax asset measures potentia...
View Answer

Correct Answer
verified
a. Temporary
Most temporary differences ...
View Answer

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The validity of a tax position is a matt...
View Answer

Correct Answer
verified
The earnings conservatism ratio is calcu...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
B

Correct Answer
verified