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47 Cards in this Set
- Front
- Back
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Which of the following usually results in an increase in a deferred tax liability?
a. Accrual of estimated operating expenses b. Revenue collected in advance c. Prepaid operating expenses d. All of the above are correct |
c. Prepaid operating expenses
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In the statement of cash flows, using the indirect method for determining cash flows from operating activities, a decrease in deferred tax liabilities is
a. Added to net income b. Subtracted from net income c. Ignored d. Included under financing activities |
b. Subtracted from net income
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Which of the following statements is true as to GAAP regarding accounting for income taxes, and its use of the asset and liability approach?
a. Considerable flexibility is permitted in the balance sheet classification of deferred tax amounts b. The approach recognizes the time value of money c. The approach is consistent with a balance sheet emphasis of US GAAP and the IASB accounting standards d. The approach is consistent with cash basis accounting |
c. The approach is consistent with a balance sheet emphasis of US GAAP and the IASB accounting standards
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Of the following temporary differences, which one ordinarily creates a deferred tax asset?
a. Completed-contract method for long-term construction contracts for tax reporting b. Installment sales for tax reporting c. Accrued warranty expense d. Accelerated depreciation for tax reporting |
c. Accrued warranty expense
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Using straight-line depreciation for financial reporting purposes and MACRS for tax purposes in the first year of an asset's life creates a:
a. Future deductible amount b. Permanent difference not requiring interperiod tax allocation c. Deferred tax asset d. Deferred tax liability |
d. Deferred tax liability
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A deferred tax asset represents a
a. Future income tax benefit b. Future cash collection c. Future tax refund d. Future amount of money to be paid out |
a. Future income tax benefit
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Of the following temporary differences, which on ordinarily creates a deferred tax asset?
a. Intangible drilling costs b. MACRS depreciation c. Rent received in advance d. Installment sales |
c. Rent received in advance
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Which of the following circumstances creates a future deductible amount?
a. Earnings of non-taxable interest on municipal bonds b. Sales of property (installment method for tax purposes) c. Prepaid operating expenses d. Accrued warranty expenses |
d. Accrued warranty expenses
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In 2011, Magic Table Inc. decides to add a 36-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:
a. An increase in a deferred tax asset b. A decrease in a deferred tax asset c. An increase in a deferred tax liability d. A decrease in a deferred tax liability |
a. An increase in a deferred tax asset
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The valuation allowance account that is used in conjunction with deferred taxes relates:
a. Only to deferred tax liabilities b. To both deferred tax assets and liabilities c. Only to deferred tax assets d. Only to income taxes receivable due to net operating loss carrybacks |
c. Only to deferred tax assets
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For classification purposes, a valuation allowance:
a. Is allocated proportionately between deferred tax assets and deferred tax liabilities b. Is allocated proportionately between the current and noncurrent portions of the deferred tax asset c. Is allocated proportionately between the current and noncurrent portions of the deferred tax liability d. Is added to the deferred tax asset |
b. Is allocated proportionately between the current and noncurrent portions of the deferred tax asset
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Which of the following would never require reporting deferred tax assets or deferred tax liabilities?
a. Depreciation on equipment b. Accrual of warranty expense c. Life insurance premiums d. Rent revenue received in advance |
c. Life insurance premiums
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When tax rates are changed subsequent to the creation of a deferred tax asset or liabilitu, GAAP requires that:
a. All deferred tax accounts be adjusted to reflect the new tax rates b. The beginning deferred tax accounts are left unchanged c. Only the current deferred tax accounts are adjusted to reflect the new tax rates d. Only the noncurrent deferred tax accounts are adjusted to reflect the new tax rates |
a. All deferred tax accounts be adjusted to reflect the new tax rates
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The effect of a change in tax rates:
a. Results in a prior period adjustment b. Is allocated between discontinued operations and continuing operations c. Is reported separately after extraordinary items d. Is reflected in income from continuing operations |
d. Is reflected in income from continuing operations
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If a company's deferred tax asset is not reduced by a valuation allowance, the company believes it is more likely that not that:
a. Sufficient financial income will be generated infuture years to realize the full tax benefit b. Sufficient financial and taxable income will exist in future years to realize the full tax benefit c. Sufficient taxable income will be generated in future years to realize the full tax benefit d. Tax rates will not change in future years |
c. Sufficient taxable income will be generated in future years to realize the full tax benefit
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A net operating loss (NOL) carryforward cannot result in the balance sheet at the end of the NOL year showing:
a. A receivable under current assets for an income tax refund b. A current deferred tax asset c. A noncurrent deferred tax asset d. Both a current and a noncurrent deferred tax asset |
a. A receivable under current assets for an income tax refund
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Recognizing tax benefits in a loss year due to a net operating loss carryforward requires
a. Creating a tax refund receivable b. Footnote disclosure only c. Creating a deferred tax asset d. Creating a deferred tax liability |
c. Creating a deferred tax asset
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Financial statement disclosure of the components of income tax expense:
a. Must be made on the face of the income statement b. Usually is included in the footnotes c. Is not necessary when only permanent differences exist d. Must include the amount of cash paid for taxes |
b. Usually is included in the footnotes
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Which of the following is not usually part of the pension formula under a defined benefit plan?
a. Age at retirement b. Number of years of service c. Seniority at time of retirement d. Compensation levele |
c. Seniority at time of retirement
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Which of the following describes defined benefit pension plans?
a. The investment risk is borne by the employee b. The plans are simple and easy to construct c. The investment risk is borne by the employer d. Retirement benefits depend on the individual's account balance |
c. The investment risk is borne by the employer
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Defined contribution pension plans that link the amount of contributions to company performance are often called:
a. Incentive savings plans b. Thrift plans c. Savings plans d. None of the above |
a. Incentive savings plans
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The employer has an obligation to provide future benefits for:
a. Defined benefit pension plans b. Defined contribution pension plans c. Defined benefit and defined contribution plans d. None of the above |
a. Defined benefit pension plans
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Which of the following statements typifies defined contribution plans?
a. Investment risk is borne by the corporation sponsoring the plan b. The plans are more complex than defined benefit plans c. Present value factors are used to determine the annual contributions to the plan d. The employer's obligation is satisfied by making the periodic contribution to the plan |
d. The employer's obligation is satisfied by making the periodic contribution to the plan
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Which of the following is not a way of measuring the pension obligation?
a. Accumulated benefit obligation b. Vested benefit obligation c. Retiree benefit obligation d. Projected benefit obligation |
c. Retiree benefit obligation
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Compared to the ABO, the PBO usually is
a. Less material b. Less representationally faithful c. Less relevant d. Less reliable |
d. Less reliable
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Interest cost will:
a. Increase the PBO and increase pension expense b. Increase pension expense and reduce plan assets c. Increase the PBO and reduce plan assets d. Increase pension expense and reduce the return on plan assets |
a. Increase the PBO and increase pension expense
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The PBO is increase by:
a. An increase in the average life expectancy of employees b. Amortization of prior service cost c. An increase in the actuary's assumed discount rate d. A return on plan assets that is lower than expected |
a. An increase in the average life expectancy of employees
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An underfunded pension plan means that the:
a. PBO is less than plan assets b. PBO exceeds plan assets c. ABO is less than plan assets d. ABO exceeds plan assets |
b. PBO exceeds plan assets
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Which of the following is true?
a. A projected benefits approach is used to determine the periodic pension expense b. An accumulated benefits approach is used to determine the periodic pension expense c. A vested benefits approach is used to determine the periodic pension expense d. The pension expense is unrelated to the pension obligation |
a. A projected benefits approach is used to determine the periodic pension expense
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Pension gains related to plan assets occur when:
a. The return on plan assets is higher than expected b. The vested benefit obligation is less than expected c. Retiree benefits paid out are less than expected d. The accumulated benefit obligation is more than expected |
a. The return on plan assets is higher than expected
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The amortization of a net gain has what effect on pension expense?
a. Decreases it b. Has no effect on it c. Increases it (but onlly by the amount over 10% of the PBO) d. Increases it (regardless of the amount) |
a. Decreases it
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Amortizing prior service cost for pension plans will:
a. Increase RE and increase accumulated OCI b. Decrease RE and decrease accumulated OCI c. Increase RE and decrease accumulated OCI d. Decrease RE and increase accumulated OCI |
d. Decrease RE and increase accumulated OCI
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A gain from changing an estimate regarding the obligation for pension plans will:
a. Increase assets b. Increase liabilities c. Decrease shareholders' equity d. Increase shareholders' equity |
d. Increase shareholders' equity
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Issued stock refers to the number of shares:
a. Outstanding plus treasury shares b. Shares issued for cash c. In the hand of shareholders d. That may be issued under state law |
a. Outstanding plus treasury shares
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When preferred stock carries a redemption privilege, the shareholders may:
a. Purchase new shares as they become available b. Exchange their preferred shares for common shares c. Surrender the preferred shares for a specified amount of cash d. Purchase treasury shares ahead of common shareholders |
c. Surrender the preferred shares of a specified amount of cash
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Accumulated other comprehensive income:
a. Is a liability b. Might include prior service cost c. Includes accumulated pension expense d. Is reported in the income statement |
b. Might include prior service cost
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A statement of comprehensive income does not include:
a. Net income b. Losses resulting from the return on assets exceeding expectations c. Losses from changes in estimates regarding the PBO d. Prior service cost |
b. Losses resulting from the return on assets exceeding expectations
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The preemptive right refers to the shareholder's right to:
a. Maintain a proportional ownership interest in the corporation b. Vote for members of the board of directors c. Receive a share of dividends d. Share in profits proportionally with all other stockholders |
a. Maintain a proportional ownership interest in the corporation
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Common shareholders usually have all of the following rights except:
a. To share in profits b. To share in assets upon liquidation c. To elect a board of directors d. To participate in the day-to-day operations |
d. To participate in the day-to-day operations
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When stock is issued in exchange for property, the best evidence of fair value might be any of the following except:
a. The appraise value of the property received b. The selling price of the stock in a recent transaction c. The price of the stock quoted on the stock exchange d. The average book value of outstanding stock |
d. The average book value of outstanding stock
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Despot declared a property dividend to give marketable securities to its common stockholders. the Securities had cost Despot $7 million and currently have a fair value of $16 million. Which of the following would be included in recording the property dividend declaration?
a. Increase in a liability for $16 million b. Decrease in retained earnings for $7 million c. Decrease in marketable securities by $16 million d. All of the above are correct |
a. Increase in a liability for $16 million
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IN 2009, Winn, Inc. issued $1 par value common stock for $35 per share. NO other common stock transactions occurred until July 31, 2011, when Winn acquired some of the issued shares for $30 per share and retired them. Which of the following statements correctly states an effect of this acquisition and retirement?
a. 2011 net income is decreased b. Additional paid-in capital is decreased c. 2011 net income is increased d. Retained earnings is increased |
b. Additional paid-in capital is decreased
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When preferred stock is purchased by the issuing corporation at a price below the original issue price and the stock is retired, the transaction:
a. Increases net income for the year b. Increases retained earnings c. Increases revenue for the year d. Increases paid-in capital share repurchase |
d. Increases paid-in capital share repurchase
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The retained earnings balance reported in the balance sheet typically is not affected by:
a. Net income b. A prior period adjustment c. Dividends paid d. Restrictions |
d. Restrictions
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Any dividend that is considered to be a liquidating dividend will:
a. Reduce retained earnings b. Reduce paid-in capital c. Increase paid-in capital d. Reduce the common stock account |
b. Reduce paid-in capital
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Preferred shares that are participating may:
a. Vote for the board of directors b. Be exchanged for common stock c. Receive extra cash during corporate liquidation d. Receive additional dividends beyond the stated amount |
d. Receive additional dividends beyond the stated amount
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Stock splits are issued primarily to:
a. Increase the number of outstanding shares b. Increase the number of authorized shares c. Increase legal capital d. Induce a decline in market value per share |
d. Induce a decline in market value per share
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