Question 1

A machine with a 10-year useful life is being depreciated on a straight-line basis for financial statement purposes,and over 5 years for income tax purposes under the accelerated recovery cost system.Assuming that the company is profitable and that there are and have been no other timing differences,the related deferred income taxes would be reported in the balance sheet at the end of the first year of the estimated useful life as a

Accepted Answer

A)  Current liability
B)  Current asset
C)  Noncurrent liability
D)  Noncurrent assetE) A) and B)
F) A) and C)

Question 2

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 D)

Question 3

A net operating loss carryover that occurs in a company's second year of operations

Accepted Answer

A)  May cause a company to report a tax benefit in the current period income statement.
B)  Has no effect on income tax expense of the current period because no taxes are paid.
C)  Causes a company to report a deferred income tax liability for taxes that are not paid currently.
D)  Results in future taxable amounts.E) A) and D)
F) B) and C)

Question 4

Smith Corporation owns only 25 percent of the voting stock of Jones Corporation,but exercises significant influence over its operating and financial policies.The tax effect of differences between taxable income and pretax accounting income attributable to undistributed earnings of Jones Corporation should be

Accepted Answer

A)  Accounted for as a timing difference
B)  Accounted for as a permanent difference
C)  Ignored because it must be based on estimates and assumptions
D)  Ignored because Smith holds less than 51 percent of the voting stock of JonesE) All of the above
F) A) and B)

Question 5

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) A) and D)
F) A) and C)

Question 6

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) All of the above
F) C) and D)

Exam 12: Accounting for Income Taxes

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

Correct Answer
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Intraperiod tax allocation arises because

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

Correct Answer
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Correct Answer
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A net operating loss carryover that occurs in a company's second year of operations

Correct Answer
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Correct Answer
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Exam 12: Accounting for Income Taxes

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

Intraperiod tax allocation arises because

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A net operating loss carryover that occurs in a company's second year of operations

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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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