Question 1

Assume Congress reduces the corporate tax rate from 35 percent to 25 percent effective in 2016. The tax rate change will affect only deferred tax assets and liabilities that arise in 2016 and thereafter.

Accepted Answer

A) True 
 B)False

Question 2

In 2016, Moody Corporation recorded the following deferred tax assets and liabilities:  
All of the deferred tax accounts relate to temporary differences that result from the company's U.S. operations. Moody wants to minimize the number of deferred tax accounts it reports on the balance sheet. What is the minimum number of deferred tax accounts Moody can report on its balance sheet and what are the names and dollar amounts in each account, assuming Moody early adopts ASU 2015-17?

Accepted Answer

Minimum number of 1: $1,300,000 net nonc...

Question 3

Which of the following statements concerning the classification of deferred tax assets and liabilities is false?

Accepted Answer

A)  A deferred tax asset is classified as noncurrent if the company expects the future tax benefit to be received more than 12 months from the balance sheet date.
B)  A deferred tax asset related to a bad debt reserve is classified as noncurrent if the company expects the bad debt to be charged off more than 12 months from the balance sheet date.
C)  A deferred tax asset related to a bad debt reserve is classified as current if the related accounts receivable is classified as a current asset.
D)  A deferred tax asset related to inventory capitalization is classified as noncurrent if the company uses a FIFO accounting method and the inventory to which the deferred tax asset relates will not be treated as sold within 12 months from the balance sheet datE.A deferred tax asset is classified based on the classification of the asset to which it relates.Accounts receivable is treated as a current asset.E) A) and D)
F) C) and D)

Question 4

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)  $330,000E) None of the above
F) A) and D)

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Swordfish Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $25,000. In addition, book depreciation exceeded tax depreciation by $100,000. In prior years, tax depreciation exceeded book depreciation by a cumulative amount of $500,000. Finally, Swordfish subtracted a dividends received deduction of $15,000 in computing its current year taxable income. Using a tax rate of 34%, Swordfish's deferred income tax expense or benefit would be:

Accepted Answer

A)  $25,500 net deferred tax expense
B)  $25,500 net deferred tax benefit
C)  $42,500 net deferred tax benefit
D)  $42,500 net deferred tax expenseE) A) and D)
F) B) and C)

Question 7

Costello Corporation reported pretax book income of $500,000. During the current year, the reserve for bad debts increased by $5,000. In addition, tax depreciation exceeded book depreciation by $40,000. Finally, Costello received $3,000 of tax-exempt life insurance proceeds from the death of one of its officers. Using a tax rate of 34%, Costello's deferred income tax expense or benefit would be:

Accepted Answer

A)  $11,900 net deferred tax expense
B)  $11,900 net deferred tax benefit
C)  $15,300 net deferred tax benefit
D)  $15,300 net deferred tax expenseE) B) and C)
F) A) and D)

Question 8

A valuation allowance can reduce both a deferred tax asset and a deferred tax liability.

Accepted Answer

A) True 
 B)False

Question 9

The Emerging Issues Task Force assists the FASB by providing guidance on the implementation of ASC 740 and other accounting pronouncements.

Accepted Answer

A) True 
 B)False

Question 10

A company's effective tax rate can best be described as:

Accepted Answer

A)  The company's cash taxes paid divided by taxable income
B)  The company's cash taxes paid divided by net income from continuing operations
C)  The company's financial statement income tax provision divided by taxable income
D)  The company's financial statement income tax provision divided by net income from continuing operationsE) B) and D)
F) None of the above

Question 11

Which of the following temporary differences creates a current deferred tax liability?

Accepted Answer

A)  Accumulated depreciation on a building
B)  Accumulated amortization on a customer list (intangible with a five-year life) 
C)  Unearned revenue expected to be collected in the next 12 months
D)  Deferred compensation expected to be paid in the next 12 monthsE) None of the above
F) B) and D)

Question 12

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) All of the above
F) A) and B)

Question 13

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

Question 14

A corporation's effective tax rate as computed in its income tax note is the company's cash tax rate for the year.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following statements is true?

Accepted Answer

A)  Another name for a taxable temporary difference is an unfavorable difference
B)  Another name for a taxable temporary difference is a favorable difference
C)  Another name for a deductible temporary difference is a favorable difference
D)  Another name for a deductible temporary difference is a permanent differenceE) All of the above
F) A) and B)

Question 16

Lynch Company had a net deferred tax asset of $68,000 at the beginning of the year, representing a net taxable temporary difference of $200,000. During the year, Lynch reported pretax book income of $800,000. Included in the computation were favorable temporary differences of $20,000 and unfavorable temporary differences of $50,000. During the year, the company's tax rate decreased from 34% to 30%. Lynch's deferred income tax expense or benefit for the current year would be:

Accepted Answer

A)  Net deferred tax benefit of $9,000
B)  Net deferred tax expense of $9,000
C)  Net deferred tax benefit of $1,000
D)  Net deferred tax expense of $1,000E) A) and B)
F) C) and D)

Question 17

Which of the following statements about uncertain tax position disclosures is false?

Accepted Answer

A)  ASC 740 requires a company to disclose the amount of unrecognized tax benefits for each country in which it files a tax return
B)  ASC 740 requires a company to disclose the aggregate amount of unrecognized tax benefits, separated between U.S., state and local, and international tax positions
C)  ASC 740 requires a company to disclose the aggregate amount of unrecognized tax benefits without separation between U.S., state and local, and international tax positions
D)  None of theseE) A) and D)
F) None of the above

Question 18

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. Using a tax rate of 34%, compute Frost's deferred income tax expense or benefit.

Accepted Answer

$51,000 deferred income tax be...

Question 19

ASC 740 is the sole source of rules related to accounting for income taxes.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following taxes would not be accounted for under ASC 740?

Accepted Answer

A)  Income taxes paid to the German government.
B)  Income taxes paid to the U.S.government.
C)  Value-added taxes paid to the Swiss government.
D)  Income taxes paid to the City of New York.E) B) and C)
F) B) and D)

Exam 17: Accounting for Income Taxes

Assume Congress reduces the corporate tax rate from 35 percent to 25 percent effective in 2016. The tax rate change will affect only deferred tax assets and liabilities that arise in 2016 and thereafter.

Correct Answer
verified

Which of the following temporary differences creates a current deferred tax liability?

Correct Answer
verified

The Emerging Issues Task Force assists the FASB by providing guidance on the implementation of ASC 740 and other accounting pronouncements.

Correct Answer
verified

Which of the following statements is true?

Correct Answer
verified

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

Correct Answer
verified

A valuation allowance can reduce both a deferred tax asset and a deferred tax liability.

Correct Answer
verified

Which of the following statements concerning the classification of deferred tax assets and liabilities is false?

Correct Answer
verified

Correct Answer
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A company's effective tax rate can best be described as:

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
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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

Which of the following taxes would not be accounted for under ASC 740?

Correct Answer
verified

Which of the following statements about uncertain tax position disclosures is false?

Correct Answer
verified

Correct Answer
verified
Minimum number of 1: $1,300,000 net nonc...
View Answer

Correct Answer
verified
$51,000 deferred income tax be...
View Answer

ASC 740 is the sole source of rules related to accounting for income taxes.

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
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Correct Answer
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Correct Answer
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A corporation's effective tax rate as computed in its income tax note is the company's cash tax rate for the year.

Correct Answer
verified

Exam 17: Accounting for Income Taxes

Assume Congress reduces the corporate tax rate from 35 percent to 25 percent effective in 2016. The tax rate change will affect only deferred tax assets and liabilities that arise in 2016 and thereafter.

Correct AnswerverifiedShow Answer

Which of the following temporary differences creates a current deferred tax liability?

Correct AnswerverifiedShow Answer

The Emerging Issues Task Force assists the FASB by providing guidance on the implementation of ASC 740 and other accounting pronouncements.

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A valuation allowance can reduce both a deferred tax asset and a deferred tax liability.

Correct AnswerverifiedShow Answer

Which of the following statements concerning the classification of deferred tax assets and liabilities is false?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A company's effective tax rate can best be described as:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow 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

Which of the following taxes would not be accounted for under ASC 740?

Correct AnswerverifiedShow Answer

Which of the following statements about uncertain tax position disclosures is false?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedMinimum number of 1: $1,300,000 net nonc...View AnswerShow Answer

Correct Answerverified$51,000 deferred income tax be...View AnswerShow Answer

ASC 740 is the sole source of rules related to accounting for income taxes.

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A corporation's effective tax rate as computed in its income tax note is the company's cash tax rate for the year.

Correct AnswerverifiedShow Answer

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Minimum number of 1: $1,300,000 net nonc...
View Answer

Correct Answer
verified
$51,000 deferred income tax be...
View Answer

Correct Answer
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