Question 1

Frost Corporation reported pretax book income of $3,000,000.Included in the computation were favorable temporary differences of $200,000,unfavorable temporary differences of $350,000,and unfavorable permanent differences of $50,000.Compute Frost's deferred income tax expense or benefit.

Accepted Answer

$31,500 deferred income tax be...

Question 2

Which of the following items is not considered evidence in determining if a valuation allowance is necessary?

Accepted Answer

A)  A cumulative book loss over some period of time.
B)  Management projects future taxable income based on a backlog of signed contracts.
C)  A net operating loss expired unused in the current year.
D)  Management can implement a tax strategy to create future taxable income,but it will be detrimental to the future profitability of the company.E) A) and B)
F) A) and C)

Question 3

A corporation undertakes a valuation allowance analysis to determine if a deferred tax asset should be recognized on the balance sheet.

Accepted Answer

A) True 
 B)False

Question 4

Farm Corporation reported pretax book loss of $500,000.Tax depreciation exceeded book depreciation by $100,000.In addition,Farm received prepaid income of $50,000,which was included on its tax return but was not included in the book loss.Compute the company's income tax expense or benefit.

Accepted Answer

$105,000 net tax benefit.The components ...

Question 5

Tax-exempt interest from municipal bonds is an example of a permanent book-tax difference.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements best describes the ASC 740 rules related to the disclosure of the components of deferred tax assets and liabilities in the company's income tax note?

Accepted Answer

A)  A publicly traded company should disclose the approximate "tax effect" (dollar amounts) of all of the components of its deferred tax assets and liabilities in a footnote to the financial statements.
B)  A publicly traded company should disclose the approximate "tax effect" (dollar amounts) of only those components of its deferred tax assets and liabilities that give rise to a "significant" portion of net deferred tax liabilities and deferred tax assets in a footnote to the financial statements.
C)  A privately held company should disclose the approximate "tax effect" (dollar amounts) of all of the components of its deferred tax assets and liabilities in a footnote to the financial statements.
D)  A privately held company should disclose the approximate "tax effect" (dollar amounts) of only those components of its deferred tax assets and liabilities that give rise to a "significant" portion of net deferred tax liabilities and deferred tax assets in a footnote to the financial statements.E) None of the above
F) B) and D)

Question 7

Which of the following statements is true?

Accepted Answer

A)  A change in capitalized inventory costs under §263A always produces an increase in a deferred tax asset.
B)  A change in capitalized inventory costs under §263A always produces a decrease in a deferred tax asset.
C)  A change in capitalized inventory costs under §263A can produce an increase or a decrease in a deferred tax asset.
D)  A change in capitalized inventory costs under §263A always produces a permanent difference.E) B) and D)
F) None of the above

Question 8

Which of the following items does not result in a permanent difference?

Accepted Answer

A)  Accelerated tax depreciation in excess of straight-line book depreciation.
B)  Interest income from a tax-exempt municipal bond.
C)  Dividends received deduction on the income tax return.
D)  Excess tax benefits from the exercise of an NQO.E) A) and B)
F) B) and C)

Question 9

Milton Corporation reported pretax book income of $2,500,000.Included in the computation were favorable temporary differences of $400,000,unfavorable temporary differences of $150,000,and favorable permanent differences of $100,000.Compute Milton's deferred income tax expense or benefit.

Accepted Answer

$52,500 deferred income tax ex...

Question 10

Which of the following items is not a permanent book-tax difference?

Accepted Answer

A)  Tax-exempt life insurance proceeds.
B)  Nondeductible meals expense.
C)  Accrued vacation pay liability not paid within the first two and a half months of the next tax year.
D)  Excess tax benefits from the exercise of NQOs.E) B) and C)
F) A) and D)

Question 11

MAC,Inc.,completed its first year of operations with a pretax loss of $300,000.The tax return showed a net operating loss of $500,000.The $200,000 book-tax difference results from excess tax depreciation over book depreciation.Management has determined that they should record a valuation allowance equal to the net deferred tax asset.Prepare the journal entries to record the deferred tax provision and the valuation allowance.

Accepted Answer

The deferred tax liability rel...

Question 12

Which of the following statements is true?

Accepted Answer

A)  ASC 740 focuses on the income tax expense or benefit on the income statement.
B)  ASC 740 focuses on the balances in the deferred tax assets and liabilities on the balance sheet.
C)  ASC 740 focuses on the income taxes paid or refunded in the statement of cash flows.
D)  ASC 740 focuses on the computation of a company's effective tax rate in the income tax note to the financial statements.E) A) and D)
F) A) and B)

Question 13

What confidence level must management have that a tax position will be sustained on audit before it can recognize any portion of the related deferred tax asset under ASC 740?

Accepted Answer

A)  More likely than not.
B)  Reasonable basis.
C)  Substantial authority.
D)  Probable.E) All of the above
F) None of the above

Question 14

Green Corporation reported pretax book income of $1,000,000.During the current year,the net reserve for warranties increased by $50,000.In addition,tax depreciation exceeded book depreciation by $100,000.Finally,Green subtracted a dividends received deduction of $25,000 in computing its current-year taxable income.Green's cash tax rate is:

Accepted Answer

A)  21 percent.
B)  20.475 percent.
C)  19.95 percent.
D)  19.425 percent.E) A) and B)
F) A) and C)

Question 15

The "current income tax expense or benefit" always represents just the taxes paid or refunded in the current year.

Accepted Answer

A) True 
 B)False

Question 16

TarHeel Corporation reported pretax book income of $1,000,000.During the current year,the net reserve for warranties increased by $100,000.In addition,tax depreciation exceeded book depreciation by $200,000.Finally,TarHeel subtracted a dividends received deduction of $50,000 in computing its current-year taxable income.TarHeel's accounting effective tax rate is:

Accepted Answer

A)  21 percent.
B)  19.95 percent.
C)  18.9 percent.
D)  17.85 percent.E) A) and B)
F) B) and C)

Question 17

A cumulative financial accounting (book)loss over three years (36 consecutive months)likely would be considered significant negative evidence in a valuation allowance analysis.

Accepted Answer

A) True 
 B)False

Question 18

Yellow Rose Corporation reported pretax book income of $100,000,000.Tax depreciation exceeded book depreciation by $100,000.During the year Yellow Rose capitalized $50,000 into ending inventory under §263A.Capitalized inventory costs of $75,000 in beginning inventory were deducted as part of cost of goods sold on the tax return.Compute Yellow Rose's taxes payable or refundable.

Accepted Answer

$20,973,75...

Question 19

Which of the following statements best describes the objective(s) of ASC 740?

Accepted Answer

A)  To compute a corporation's current income tax liability or benefit.
B)  To recognize deferred tax liabilities and assets.
C)  To report permanent differences in the balance sheet.
D)  To both compute a corporation's current income tax liability or benefit and to recognize deferred tax liabilities and assets.E) All of the above
F) A) and D)

Question 20

Jones Company reported pretax book income of $400,000.Included in the computation were favorable temporary differences of $50,000,unfavorable temporary differences of $20,000,and favorable permanent differences of $40,000.Book equivalent of taxable income is:

Accepted Answer

A)  $440,000.
B)  $400,000.
C)  $360,000.
D)  $330,000.E) C) and D)
F) A) and D)

Exam 17: Accounting for Income Taxes

Correct Answer
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The deferred tax liability rel...
View Answer

Correct Answer
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Which of the following items is not considered evidence in determining if a valuation allowance is necessary?

Correct Answer
verified

A cumulative financial accounting (book)loss over three years (36 consecutive months)likely would be considered significant negative evidence in a valuation allowance analysis.

Correct Answer
verified

Farm Corporation reported pretax book loss of $500,000.Tax depreciation exceeded book depreciation by $100,000.In addition,Farm received prepaid income of $50,000,which was included on its tax return but was not included in the book loss.Compute the company's income tax expense or benefit.

Correct Answer
verified
$105,000 net tax benefit.The components ...
View Answer

Correct Answer
verified
$20,973,75...
View Answer

Which of the following items does not result in a permanent difference?

Correct Answer
verified

Which of the following statements best describes the ASC 740 rules related to the disclosure of the components of deferred tax assets and liabilities in the company's income tax note?

Correct Answer
verified

Which of the following items is not a permanent book-tax difference?

Correct Answer
verified

What confidence level must management have that a tax position will be sustained on audit before it can recognize any portion of the related deferred tax asset under ASC 740?

Correct Answer
verified

A corporation undertakes a valuation allowance analysis to determine if a deferred tax asset should be recognized on the balance sheet.

Correct Answer
verified

Which of the following statements is true?

Correct Answer
verified

Which of the following statements is true?

Correct Answer
verified

Correct Answer
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Which of the following statements best describes the objective(s) of ASC 740?

Correct Answer
verified

The "current income tax expense or benefit" always represents just the taxes paid or refunded in the current year.

Correct Answer
verified

Frost Corporation reported pretax book income of $3,000,000.Included in the computation were favorable temporary differences of $200,000,unfavorable temporary differences of $350,000,and unfavorable permanent differences of $50,000.Compute Frost's deferred income tax expense or benefit.

Correct Answer
verified
$31,500 deferred income tax be...
View Answer

Milton Corporation reported pretax book income of $2,500,000.Included in the computation were favorable temporary differences of $400,000,unfavorable temporary differences of $150,000,and favorable permanent differences of $100,000.Compute Milton's deferred income tax expense or benefit.

Correct Answer
verified
$52,500 deferred income tax ex...
View Answer

Jones Company reported pretax book income of $400,000.Included in the computation were favorable temporary differences of $50,000,unfavorable temporary differences of $20,000,and favorable permanent differences of $40,000.Book equivalent of taxable income is:

Correct Answer
verified

Tax-exempt interest from municipal bonds is an example of a permanent book-tax difference.

Correct Answer
verified

Exam 17: Accounting for Income Taxes

Correct AnswerverifiedThe deferred tax liability rel...View AnswerShow Answer

Correct AnswerverifiedShow Answer

Which of the following items is not considered evidence in determining if a valuation allowance is necessary?

Correct AnswerverifiedShow Answer

A cumulative financial accounting (book)loss over three years (36 consecutive months)likely would be considered significant negative evidence in a valuation allowance analysis.

Correct AnswerverifiedShow Answer

Farm Corporation reported pretax book loss of $500,000.Tax depreciation exceeded book depreciation by $100,000.In addition,Farm received prepaid income of $50,000,which was included on its tax return but was not included in the book loss.Compute the company's income tax expense or benefit.

Correct Answerverified$105,000 net tax benefit.The components ...View AnswerShow Answer

Correct Answerverified$20,973,75...View AnswerShow Answer

Which of the following items does not result in a permanent difference?

Correct AnswerverifiedShow Answer

Which of the following statements best describes the ASC 740 rules related to the disclosure of the components of deferred tax assets and liabilities in the company's income tax note?

Correct AnswerverifiedShow Answer

Which of the following items is not a permanent book-tax difference?

Correct AnswerverifiedShow Answer

What confidence level must management have that a tax position will be sustained on audit before it can recognize any portion of the related deferred tax asset under ASC 740?

Correct AnswerverifiedShow Answer

A corporation undertakes a valuation allowance analysis to determine if a deferred tax asset should be recognized on the balance sheet.

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements best describes the objective(s) of ASC 740?

Correct AnswerverifiedShow Answer

The "current income tax expense or benefit" always represents just the taxes paid or refunded in the current year.

Correct AnswerverifiedShow Answer

Frost Corporation reported pretax book income of $3,000,000.Included in the computation were favorable temporary differences of $200,000,unfavorable temporary differences of $350,000,and unfavorable permanent differences of $50,000.Compute Frost's deferred income tax expense or benefit.

Correct Answerverified$31,500 deferred income tax be...View AnswerShow Answer

Milton Corporation reported pretax book income of $2,500,000.Included in the computation were favorable temporary differences of $400,000,unfavorable temporary differences of $150,000,and favorable permanent differences of $100,000.Compute Milton's deferred income tax expense or benefit.

Correct Answerverified$52,500 deferred income tax ex...View AnswerShow Answer

Jones Company reported pretax book income of $400,000.Included in the computation were favorable temporary differences of $50,000,unfavorable temporary differences of $20,000,and favorable permanent differences of $40,000.Book equivalent of taxable income is:

Correct AnswerverifiedShow Answer

Tax-exempt interest from municipal bonds is an example of a permanent book-tax difference.

Correct AnswerverifiedShow Answer

Correct Answer
verified
The deferred tax liability rel...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
$105,000 net tax benefit.The components ...
View Answer

Correct Answer
verified
$20,973,75...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
$31,500 deferred income tax be...
View Answer

Correct Answer
verified
$52,500 deferred income tax ex...
View Answer

Correct Answer
verified

Correct Answer
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