Chapter 19

A deferred tax asset represents the: A.increase in taxes saved in future years as a result of deductible temporary differences. B.decrease in taxes saved in future years as a result of deductible temporary differences. C.increase in taxes payable in future years as a result of deductible temporary differences. D.decrease in taxes payable in future years as a result of deductible temporary differences.

A

Deferred tax expense is the: A.increase in a deferred tax liability. B.decrease in a deferred tax asset. C.decrease in a deferred tax liability. D.increase in a deferred tax asset.

A

Multiple categories of deferred taxes should be classified into a net current amount and a net noncurrent amount. A. True B. False

A

A deferred tax liability represents the decrease in taxes payable in future years as a result of a taxable temporary difference. A. True B. False

B

A deferred tax valuation allowance account is used to recognize a reduction in A.both a deferred tax asset and a deferred tax liability. B.a deferred tax asset only. C.a deferred tax liability only. D.income tax expense.

B

A deferred tax valuation allowance account is used to recognize a reduction in: A.both a deferred tax asset and deferred tax liability. B.a deferred tax asset only. C.a deferred tax liability only. D.income tax expense.

B

A valuation account is used to: A.reduce a deferred tax liability. B.reduce a deferred tax asset. C.increase a deferred tax liability. D.increase a deferred tax asset.

B

Deferred taxes should be presented on the balance sheet A.as one net debit or credit amount. B.in two amounts: one for the net current amount and one for the net noncurrent amount. C.in two amounts: one for the net debit amount and one for the net credit amount. D.as reductions of the related asset or liability accounts.

B

In computing deferred income taxes for which graduated tax rates are a significant factor, companies are required to use the: A.graduated rates. B.average rates. C.incremental rates. D.actual rates.

B

Income tax expense is based on: A.taxable income. B.pretax income. C.operating income. D.income from continuing operations.

B

Permanent differences result in deferred tax consequences. A. True B. False

B

Recognition of tax benefits in the loss year due to a loss carryforward requires A.the establishment of a deferred tax liability. B.the establishment of a deferred tax asset. C.the establishment of an income tax refund receivable. D.only a note to the financial statements.

B

Taxable amounts are temporary differences that: A.decrease taxable income in future years. B.require the recording of a deferred tax liability. C.require the recording of a deferred tax asset. D.increase pretax financial income in future years.

B

Taxable temporary differences give rise to recording deferred tax assets. A. True B. False

B

The deferred tax expense is the A.increase in balance of deferred tax asset minus the increase in balance of deferred tax liability. B.increase in balance of deferred tax liability minus the increase in balance of deferred tax asset. C.increase in balance of deferred tax asset plus the increase in balance of deferred tax liability. D.decrease in balance of deferred tax asset minus the increase in balance of deferred tax liability.

B

Under GAAP, companies should classify all deferred taxes as noncurrent. A. True B. False

B

Under the asset-liability method, the measurement of current and deferred tax liabilities and assets is based on provisions of the anticipated future tax law. A. True B. False

B

Which of the following are temporary differences that are normally classified as expenses or losses and are deductible after they are recognized in financial income? A.Advance rental receipts. B.Product warranty liabilities. C.Depreciable property. D.Fines and expenses resulting from a violation of law.

B

A deferred tax liability represents the A.increase in taxes saved in future years as a result of deductible temporary differences. B.decrease in taxes saved in future years as a result of deductible temporary differences. C.increase in taxes payable in future years as a result of taxable temporary differences. D.decrease in taxes payable in future years as a result of taxable temporary differences.

C

A deferred tax liability represents the: A.increase in taxes saved in future years as a result of deductible temporary differences. B.decrease in taxes saved in future years as a result of deductible temporary differences. C.increase in taxes payable in future years as a result of taxable temporary differences. D.decrease in taxes payable in future years as a result of taxable temporary differences.

C

Gulfport Corporation's taxable income differed from its accounting income computed for this past year. An item that would create a permanent difference in accounting and taxable incomes for Gulfport would be A.a balance in the Unearned Rent account at year end. B.using accelerated depreciation for tax purposes and straight-line depreciation for book purposes. C.a fine resulting from violations of OSHA regulations. D.making installment sales during the year.

C

Tax rates other than the current tax rate may be used to calculate the deferred income tax amount on the balance sheet if A.it is probable that a future tax rate change will occur. B.it appears likely that a future tax rate will be greater than the current tax rate. C.it appears likely that a future tax rate will be less than the current tax rate. D.the future tax rates have been enacted into law.

C

The FASB believes that the most consistent method for accounting for income taxes is the A.temporary-permanent method. B.carryback-carryforward method. C.asset-liability method. D.benefit-obligation method.

C

Which of the following statements related to loss carrybacks and carryforwards is correct? A.The benefit due to a loss carryback can be reported in both the loss year and future years. B.The benefit due to a loss carryforward is reported only in the loss year. C.The benefit due to a loss carryforward can be reported in both the loss year and future years. D.The benefit due to a loss carryback is reported only in the second year preceding the loss year.

C

Income tax expense should be allocated to all of the following except: A.continuing operations. B.discontinued operations. C.prior period adjustments. D.unusual or infrequent items.

D

Income tax payable is based (computed) on: A.income before taxes. B.income for book purposes. C.pretax financial income. D.taxable income.

D

The last procedure (step) in the computation of deferred income taxes is to: A.measure the total deferred tax asset (liability) using the appropriate tax rate. B.measure deferred tax assets for each type of tax credit carryforward. C.identify the types and amounts of existing temporary differences. D.reduce deferred tax assets by a valuation allowance if necessary.

D

Which of the following is a permanent difference? A.Installment sales accounted for on an accrual basis. B.Product warranty liabilities. C.Deductible pension funding exceeding expense. D.Interest received on state and municipal obligations.

D