Accounting 311 Multiple Choice-Chapter 19

Assuming a 40% statutory tax rate applies to all years involved, which of the following situations will give rise to reporting a deferred tax liability on the balance sheet

A revenue is deferred for tax purposes but not for financial reporting purposes An expense is deferred for financial reporting purposes but not for tax purposes

Which of the following temporary differences results in a deferred tax asset in the year the temporary difference originates

Accrual for product warranty and liability Subscriptions received in advance

A temporary difference arises when a revenue item is reported for tax purposes in a period

After it is reported in financial income and before it is reported in financial income

Major reasons for disclosure of deferred income tax information is (are)

All of these answers are correct better assessment of quality earnings better predictions of future cash flows predicting future cash flows for operating loss carryfowards

An example of a permanent difference is

All of these answers are correct: proceeds from life insurance on officers interest expense on money borrowed to invest in municipal bonds insurance expense for a life insurance policy on officers

Companies are required to disclose the total of each of the following except

All of these must be disclosed all deferred tax assets all deferred tax liabilities the total valuation allowance

Which of the following is a temporary difference classified as a revenue or gain that is taxable after it is recognized in financial income?

An installment sale accounted for on the accrual basis for financial reporting purposes and on the installment(cash) basis for tax purposes

Recognizing a valuation allowance for a deferred tax asset requires that a company

Consider all positive and negative information in determining the need for a valuation allowance

Which of the following differences would result in future taxable amounts

Expenses or losses that are tax deductible before they are recognized in financial income

Which of the following are temporary differences that are normally classified as expenses or losses that are deductible after they are recognized in financial income

Fines and expenses resulting from a violation of law

Machinery was acquired at the beginning of the year. Deprecitation recorded during the life of the machinery could result in

Future Taxable and Deductible Amounts

Which of the following will NOT result in a temporary difference

Interest received on municipal obligations

Taxable income of a corporation differs from pretax financial income because of

Permanent and Temporary Differences

Which of the following is NOT considered a permanent difference

Stock-based compensation expense

A company records an unrealized loss on trading securities. This would result in what type of difference and in what type of deferred income tax

Temporary Difference Deferred Tax Asset

A company uses the equity method to account an investment for financial reporting purposes. This would result in what type of difference and in what type of deferred income tax

Temporary Difference Deferred Tax Liability

Tanner, inc. incurred a financial and taxable loss for 2018. Tanner therefore decided to use the carryback provisions as it had been profitable up to this year. How should the amounts related to the carryback be reported in the 2018 financial statement

The refund claimed should be shown as a benefit due to loss carryforward in 2018

At the Dec. 31, 2017 balance sheet date, Unruh Corporation reports an accrued receivable for financial reporting purposes but not for tax purposes. When this asset is recovered in 2018, a future taxable amount will occur and

Uhruh will record a decrease in a deferred tax liability in 2018.

Stuart Corporation's taxable income differed from its accounting income computed for this past year. An item that would create a permanent difference in accounting an taxable income for Stuart would be

a fine resulting from violations of OSHA regulations

Accounting for income taxes can result on the reporting of deferred taxes as

a noncurrent liability

Uncertain tax positions

are positions for which the tax authorities may disallow a deduction in whole or in part

Deferred taxes should be presented on the balance sheet

as a noncurrent amount

Taxable Income of a corporation

differs from accounting income because companies use the full accrual method for financial reporting but use the modified cash basis for tax reporting.

The deferred tax expense is the

increase in balance of deferred tax liability minus the increase in balance of deferred tax asset

With regard to uncertain tax positions, the FASB requires that companies recognize a tax benefit when

it is more likely than not that the tax position will be sustained upon audit

All of the following are procedures for the computation of deferred income taxes except to

measure the total deferred tax liability for deductible temporary differences

Companies are permitted to offset any balances in income taxes payable against

related income tax refund receivable or prepaid income taxes balances

When a change in the tax rate is enacted into law, its effect on existing deferred income tax accounts should be

reported as an adjustment to income tax expense in the period of change

A major distinction between temporary and permanent differences is

temporary differences reverse themselves in subsequent accounting periods, whereas permanent differences do not reverse.

Recognition of tax benefits in the loss year due to a loss carryforward requires

the establishment of a deferred tax asset

Tax rates other than the current tax rate may be used to calculate the deferred income tax amount on the balance sheet if

the future tax rates have been enacted into law