Chapter 16

Front 1

GAAP regarding accounting for income taxes requires the following procedure:

Back 1

Computation of deferred tax assets and liabilities based on temporary differences.

Front 2

Which of the following causes a temporary difference between taxable and pretax accounting income?

Back 2

MACRS used for depreciating equipment.

Front 3

**Which of the following differences between financial accounting and tax accounting ordinarily creates a deferred tax liability?

Back 3

Prepaid rent.

Front 4

A result of inter period tax allocation is...

Back 4

The income tax expense in the income statement is the sum of the income taxes payable for the year and the changes in DTA/L balances for the year.

Front 5

Which of the following creates a DTL?

Back 5

Accelerated depreciation in the tax return.

Front 6

Which of the following circumstances creates a future taxable amount?

Back 6

Straight-line depreciation for financial reporting and accelerated depreciation for tax reporting.

Front 7

Which of the following usually result in an increase in DTL?

Back 7

Prepaid operating expenses.

Front 8

In the statement of cash flows, using the indirect method for determining cash flows from operating activities, a decrease in DTL is...

Back 8

Subtracted from net income

Front 9

Which of the following statements is true as to GAAP regarding accounting for income taxes, and its use of the asset and liability approach?

Back 9

The approach is consistent with a balance sheet emphasis of U.S. GAAP and the IASB accounting standards.

Front 10

Of the following temporary differences, which one ordinarily creates a DTA?

Back 10

accrued warranty expense.

Front 11

Using straight-line depreciation for financial reporting purposes and MACRS for tax purposes in the first year of an asset's life creates a...

Back 11

Deferred tax liability.

*This temporary difference creates a future taxable amount giving rise to a DTL.

Front 12

A deferred tax asset represents a...

Back 12

Future income tax benefit.

Front 13

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

Back 13

Rent received in advance.

Front 14

Which of the following differences between financial accounting and tax accounting ordinarily creates a deferred tax asset?

Back 14

Revenue collected in advance.

Front 15

Which of the following creates a DTA?

Back 15

An unrealized loss from recording investments at fair value.

Front 16

Which of the following circumstances creates a future deductible amount?

Back 16

Accrued warranty expenses.

Front 17

Estimated employee compensation expenses earned during the current period but expected to be paid in the next period causes...

Back 17

An increase in DTA.

Front 18

A magazine publisher collects one year in advance for subscription revenue. In the year of providing the magazines to customers, the company would record:

Back 18

A decrease in DTA.

Front 19

In 2011, Magic Table Inc. decides to add a 30 month warranty on its new product sales. Warranty costs are tax deductible when claims are settled. In its financial statements for 2011, Magic Table Inc incurs:

Back 19

An increase in a DTA

Front 20

Which of the following usually results in an increase in a DTA?

Back 20

Accelerated depreciation, Prepaid Ins, Subscriptions delivered

None of the above are correct

Front 21

At the end of the current year, Newsmax Inc. has $400,000 of subscriptions received in advance included in its balance sheet. A footnote reveals that the entire $400,000 will be earned in the next year. In the absence of other temporary differences, in the BS one would also expect to find a:

Back 21

Current DTA

Front 22

**The valuation allowance account that is used in conjunction with DTA is a

Back 22

Contra asset

Front 23

The valuation allowance account that is used in conjunction with deferred taxes relates:

Back 23

Only to DTA

Front 24

For classification purposes, a valuation allowance:

Back 24

Is allocated proportionately between the current and concurrent portions of the DTA.

Front 25

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

Back 25

Interest income on municipal bonds.

Front 26

In reconciling net income to taxable income, interest earned on municipal bonds is

Back 26

A permanent difference

Front 27

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

Back 27

Interest earned on municipal securities.

Front 28

Which of the following would never require reporting DTA or DTL?

Back 28

Life insurance premiums.

Front 29

When tax rates are changed subsequent to the creation of a DTA or DTL, GAAP requires that...

Back 29

All deferred tax accounts be adjusted to reflect the new tax rates.

Front 30

The effect of a change in tax rates...

Back 30

is reflected in income from continuing operations.

Front 31

Under current tax law, generally a net operating loss may be carried back..

Back 31

2 years

Front 32

Under current law a net operating loss may be carried forward up to...

Back 32

20 years

Front 33

If a company's DTA is not reduced by a valuation allowance, the company believes it is more likely than not that...

Back 33

Sufficient taxable income will be generated in future years to realize the full tax benefit.

Front 34

If a company's DTA is not reduced by a valuation allowance, the company believes it is more likely than not that...

Back 34

sufficient taxable income will be generated in future years to realize the full tax benefit.

Front 35

A NOL carry forward cannot result in the balance sheet at the end of the NOL year showing...

Back 35

A receivable under current assets for an income tax refund.

Front 36

The tax effect of a NOL carry back usually...

Back 36

Results in a current receivable at the end of the NOL year.

Front 37

Recognizing tax benefits in a loss year due to a NOL carry forward requires...

Back 37

creating a DTA.

Front 38

According to GAAP for accounting for income taxes, when a company has a NOL carry forward...

Back 38

A DTA is recorded along with any applicable valuation allowance.

Front 39

For reporting purposes, current DTA and current DTL are...

Back 39

netted against one another in the balance sheet.

Front 40

Financial statement disclosure of the components of income tax expense...

Back 40

usually is included in the footnotes.

Front 41

Due to differences between depreciation reported in the IS and depreciation deducted for tax purposes, Lucas Corp. has two million dollars in temporary differences that will increase taxable income next year. Assuming that Lucas has no other temporary differences, deferred income taxes should be reported in this year's ending BS as a...

Back 41

Noncurrent DTL.