Accounting Exam 3

GAAP regarding accounting for income taxes requires which of the following procedures?

computation of deferred tax assets and liabilities based on temporary differences

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

MACRS used for depreciating equipment

classification criteria to determine if lease classifies as finance lease

1. Ownership transfers to lessee at end of lease 2. Written bargain purchase option reasonably certain to be exercised 3. 90% of the assets fair value is represented by the present value of the lease payments 4. 75% of the assets useful life will be used in the lease term 5. underlying asset is of a specialized nature with no alternative use

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

deferred tax liability

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

depreciation early in the life of an asset

a deferred tax assets represents a

future income tax benefit

from the perspective of the lessee, the lease may be classified as

operating or finance

from the perspective of the lessor, two possible lease classifications are

operating or sales type

why enter into leases?

reduces upfront cash, and often payments are lower, tax implications

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

revenue collected in advance

the 5 criteria provided in GAAP for distinguishing a finance lease from an operating lease do not include

the collectibility of lease payments must be reasonably predictable

which of the following is not among the criteria for classifying a lease as a finance lease

the lease term is for substantially all of the remaining economic life of the underlying asset

for the lessor to account for a lease as a sales-type lease, the lease must meet

any one of the five criteria specified by GAAP regarding accounting for leases

for the lessee to account for a lease as a finance lease, the lease must meet

any one of the five criteria specified by GAAP regarding accounting for leases

leases

a contractual arrangement by which the lessor (owner) provides the lessee (user) the right to use an asset for a specified period of time - examples: vehicles, office space, machinery, computers

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

a permanent difference

which ordinarily creates a deferred tax asset

accrued warranty expense

which of the following circumstances creates a future deductible amount

accrued warranty expenses

one of the five criteria for a finance lease specifies that the lease term must be equal to or greater than

the major part of the remaining economic life of the leased property

financial statement disclosure of the components of income tax expense

usually is included in the disclosure notes