Question 1

Which of the following statements is true?

Accepted Answer

A)  In determining if a valuation allowance is needed,positive evidence is considered more persuasive than negative evidence.
B)  In determining if a valuation allowance is needed,negative evidence is considered more persuasive than positive evidence.
C)  In determining if a valuation allowance is needed,negative and positive evidence must be evaluated equally.
D)  In determining if a valuation allowance is needed,only negative evidence is evaluated.E) A) and D)
F) B) and C)

Question 2

Which of the following statements is true with respect to a company's effective tax rate reconciliation?

Accepted Answer

A)  The hypothetical tax expense is the tax that would be due if the company's statutory tax rate were applied to the company's net income from continuing operations.
B)  The hypothetical tax expense is the tax that would be due if the company's statutory tax rate were applied to the company's taxable income.
C)  The hypothetical tax expense is the tax that would be due if the company's statutory tax rate were applied to the company's book equivalent of taxable income.
D)  The hypothetical tax expense is another name for the company's effective tax rate.E) B) and D)
F) A) and D)

Question 3

Sparrow Corporation reported pretax book income of $5,000,000.During the current year,the reserve for warranties increased by $300,000.In addition,tax depreciation exceeded book depreciation by $400,000.Finally,Sparrow received $50,000 of tax-exempt interest from municipal bonds.Compute Sparrow's current income tax expense or benefit.

Accepted Answer

$1,018,500...

Question 4

ASC 740 governs how a company accounts for all taxes it incurs.

Accepted Answer

A) True 
 B)False

Question 5

Gull Corporation reported pretax book income of $2,000,000.Included in the computation were favorable temporary differences of $300,000,unfavorable temporary differences of $200,000,and favorable permanent differences of $50,000.Compute Gull's current income tax expense or benefit.

Accepted Answer

$388,500 c...

Question 6

Temporary differences that are cumulatively "favorable" are referred to as taxable temporary differences.

Accepted Answer

A) True 
 B)False

Question 7

ASC 740 applies to accounting for state,local,and international income taxes as well as federal income taxes.

Accepted Answer

A) True 
 B)False

Question 8

Bruin Company received a $100,000 insurance payment on the death of its company president.The company annually paid $1,000 of nondeductible insurance premiums on the policy.Bruin reported the insurance receipt as income and deducted the premium payments on its books.For ASC 740 purposes,the income and deduction are characterized as:

Accepted Answer

A)  Both are taxable temporary differences.
B)  Both are deductible temporary differences.
C)  The insurance receipt is a favorable permanent difference and the premium payment is an unfavorable permanent difference.
D)  The insurance receipt is a taxable temporary difference and the premium payment is an unfavorable permanent difference.E) C) and D)
F) None of the above

Question 9

Which of the following statements best describes the ASC 740 process for evaluating a company's uncertain tax positions?

Accepted Answer

A)  ASC 740 requires a company to complete a two-step analysis every time it evaluates its uncertain tax positions.
B)  ASC 740 requires a company to complete Step 2 (measurement) in its evaluation of its uncertain tax positions only if it is more likely than not that its tax position will be sustained on its merits (recognition) .
C)  ASC 740 allows a company to take into account the probability of audit by a tax authority in Step 1 (measurement) in its evaluation of its uncertain tax positions.
D)  ASC 740 allows a company to record a tax benefit from an uncertain tax position only if it is probable the benefit will be sustained on audit by a tax authority.E) C) and D)
F) B) and C)

Question 10

Potter,Inc.reported pretax book income of $5,000,000.During the current year,the reserve for bad debts increased by $100,000.In addition,tax depreciation exceeded book depreciation by $300,000.Potter sold a fixed asset and reported book gain of $60,000 and tax gain of $80,000.Finally,the company received $50,000 of tax-exempt municipal bond interest.Compute Potter's deferred income tax expense or benefit.

Accepted Answer

$37,800 deferred income tax ex...

Question 11

Identify the following items as creating a temporary difference,permanent difference,or no difference.

Accepted Answer

The answer of Identify the following items as creating a...

Question 12

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

Accepted Answer

A)  Accumulated tax depreciation in excess of book depreciation on a building.
B)  Accumulated tax amortization in excess of book amortization on a customer list.
C)  Compensation expensed for book purposes but deferred for tax purposes.
D)  Both accumulated tax depreciation in excess of book depreciation on a building and accumulated tax amortization in excess of book amortization on a customer list create a deferred tax liability.E) A) and C)
F) All of the above

Question 13

Which of the following book-tax basis differences results in a deductible temporary difference?

Accepted Answer

A)  Book basis of an employee's postretirement benefits liability exceeds its tax basis.
B)  Book basis of a building exceeds the tax basis of the building.
C)  Book basis of an acquired intangible exceeds the tax basis of the intangible.
D)  Tax basis of a prepaid liability exceeds the book basis of the liability.E) All of the above
F) None of the above

Question 14

Which of the following items is not a temporary difference?

Accepted Answer

A)  Vacation pay accrued for tax purposes in a prior period is deducted in the current period.
B)  Tax depreciation for the period exceeds book depreciation.
C)  A goodwill impairment expense is recorded on the income statement; the goodwill did not have a tax basis when it was created.
D)  Bad debts charged off in the current period exceed the bad debts accrued in the current period.E) All of the above
F) None of the above

Question 15

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 16

Weber Corporation reported pretax book income of $400,000.Included in the computation were favorable temporary differences of $100,000,unfavorable temporary differences of $300,000,and unfavorable permanent differences of $200,000.Compute the company's book equivalent of taxable income.Use this number to compute the company's total income tax provision or benefit.

Accepted Answer

BETI of $600,000 and a total i...

Question 17

Which of the following best describes the focus of ASC 740?

Accepted Answer

A)  ASC 740 uses an "asset and liability approach" that focuses on the balance sheet.
B)  ASC 740 uses an "income and expense approach" that focuses on the income statement.
C)  ASC 740 uses a "taxes paid or refunded approach" that focuses on the statement of cash flows.
D)  ASC 740 uses a "permanent differences approach" that focuses on the effective tax rate reported in the income tax note to the financial statements.E) A) and B)
F) C) and D)

Question 18

Which of the following items is not a reconciling item in the income tax footnote?

Accepted Answer

A)  Compensation deduction related to incentive stock options.
B)  Compensation deduction related to nonqualified stock options that were expensed for financial accounting purposes.
C)  Dividends received deduction.
D)  State and local income taxes.E) None of the above
F) A) and D)

Question 19

Which of the following groups does not issue rules that apply to accounting for income taxes?

Accepted Answer

A)  FASB.
B)  SEC.
C)  EITF.
D)  IRS.E) All of the above
F) B) and D)

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 17: Accounting for Income Taxes

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

Correct Answer
verified

ASC 740 governs how a company accounts for all taxes it incurs.

Correct Answer
verified

Which of the following statements is true with respect to a company's effective tax rate reconciliation?

Correct Answer
verified

Which of the following book-tax basis differences results in a deductible temporary difference?

Correct Answer
verified

Gull Corporation reported pretax book income of $2,000,000.Included in the computation were favorable temporary differences of $300,000,unfavorable temporary differences of $200,000,and favorable permanent differences of $50,000.Compute Gull's current income tax expense or benefit.

Correct Answer
verified
$388,500 c...
View Answer

Which of the following items is not a reconciling item in the income tax footnote?

Correct Answer
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Correct Answer
verified
$1,018,500...
View Answer

Which of the following items is not a temporary difference?

Correct Answer
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Correct Answer
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BETI of $600,000 and a total i...
View Answer

Which of the following statements is true?

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

Temporary differences that are cumulatively "favorable" are referred to as taxable temporary differences.

Correct Answer
verified

ASC 740 applies to accounting for state,local,and international income taxes as well as federal income taxes.

Correct Answer
verified

Which of the following statements best describes the ASC 740 process for evaluating a company's uncertain tax positions?

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 groups does not issue rules that apply to accounting for income taxes?

Correct Answer
verified

Correct Answer
verified

Which of the following best describes the focus of ASC 740?

Correct Answer
verified

Identify the following items as creating a temporary difference,permanent difference,or no difference.

Correct Answer
verified

Correct Answer
verified
$37,800 deferred income tax ex...
View Answer

Exam 17: Accounting for Income Taxes

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

Correct AnswerverifiedShow Answer

ASC 740 governs how a company accounts for all taxes it incurs.

Correct AnswerverifiedShow Answer

Which of the following statements is true with respect to a company's effective tax rate reconciliation?

Correct AnswerverifiedShow Answer

Which of the following book-tax basis differences results in a deductible temporary difference?

Correct AnswerverifiedShow Answer

Gull Corporation reported pretax book income of $2,000,000.Included in the computation were favorable temporary differences of $300,000,unfavorable temporary differences of $200,000,and favorable permanent differences of $50,000.Compute Gull's current income tax expense or benefit.

Correct Answerverified$388,500 c...View AnswerShow Answer

Which of the following items is not a reconciling item in the income tax footnote?

Correct AnswerverifiedShow Answer

Correct Answerverified$1,018,500...View AnswerShow Answer

Which of the following items is not a temporary difference?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedBETI of $600,000 and a total i...View AnswerShow Answer

Which of the following statements is true?

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

Temporary differences that are cumulatively "favorable" are referred to as taxable temporary differences.

Correct AnswerverifiedShow Answer

ASC 740 applies to accounting for state,local,and international income taxes as well as federal income taxes.

Correct AnswerverifiedShow Answer

Which of the following statements best describes the ASC 740 process for evaluating a company's uncertain tax positions?

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 groups does not issue rules that apply to accounting for income taxes?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following best describes the focus of ASC 740?

Correct AnswerverifiedShow Answer

Identify the following items as creating a temporary difference,permanent difference,or no difference.

Correct AnswerverifiedShow Answer

Correct Answerverified$37,800 deferred income tax ex...View AnswerShow 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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$388,500 c...
View Answer

Correct Answer
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Correct Answer
verified
$1,018,500...
View Answer

Correct Answer
verified

Correct Answer
verified
BETI of $600,000 and a total i...
View Answer

Correct Answer
verified

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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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
$37,800 deferred income tax ex...
View Answer