FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 17: Accounting for Income Taxes

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

True/False

Review LaterAdd Note

Review Later

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

A) True
B) False

Correct Answer

verified

Show Answer

Question 42

Multiple Choice

Review LaterAdd Note

Review Later

Marlin 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. Finally, Marlin subtracted a dividends received deduction of $15,000 in computing its current year taxable income. Using a tax rate of 34%, Marlin's current income tax expense or benefit would be:

A) $387,600
B) $377,400
C) $340,000
D) $292,400

E) A) and D)
F) All of the above

Correct Answer

verified

Show Answer

Question 43

True/False

Review LaterAdd Note

Congress reduces the corporate tax rate from 35 percent to 25 percent effective in 2015. The tax rate change will affect only deferred tax assets and liabilities that arise in 2015 and thereafter.

Bruin Company received a $100,000 insurance payment on the death of its company president. The company annually paid $1,000 of non-deductible 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:

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

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

Green Corporation reported pretax book income of $1,000,000. During the current year, the net reserve for warranties increased by $25,000. In addition, tax depreciation exceeded book depreciation by $100,000. Finally, Green subtracted a dividends received deduction of $25,000 in computing its current year taxable income. Using a tax rate of 34%, Green's cash tax rate is:

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

Farm Corporation reported pretax book loss of $500,000 in 2014. Tax depreciation exceeded book depreciation by $100,000. In addition, Farm received prepaid income of $50,000, which was included on its tax return but was not included in the book loss. Farm had $0 taxable income in 2013 and 2012. Assuming a tax rate of 34%, compute the Company's deferred income tax expense or benefit for 2014.

Which of the following temporary differences creates a deferred tax asset in the year in which it originates?

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

Lafayette, Inc. completed its first year of operations with a pretax loss of $800,000. The tax return showed a net operating loss of $750,000, which the company will carry forward. The $50,000 book-tax difference results from a disallowed deduction for meals and entertainment. Management has determined that they should record a valuation allowance equal to the net deferred tax asset. Assuming a tax rate of 34%, prepare the journal entries to record the deferred tax provision and the valuation allowance.

Temporary differences create either a deferred tax asset or a deferred tax liability.

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

Stone Corporation reported pretax book income of $1,000,000 in 2014. Tax depreciation exceeded book depreciation by $300,000. In addition, the reserve for bad debts decreased by $50,000. Stone had a net deferred tax asset of $29,000 at the beginning of the year, representing a net deductible temporary difference of $100,000. During the year, the company's tax rate increased from 29% to 30%. Compute the Company's current and deferred income tax expense or benefit for 2014.

Grand River Corporation reported pretax book income of $500,000. Included in the computation were favorable temporary differences of $100,000, unfavorable temporary differences of $10,000, and favorable permanent differences of $90,000. Assuming a tax rate of 34%, the Corporation's current income tax expense or benefit would be:

Which of the following statements is true?

ASC 740 applies a two-step process in determining if an uncertain tax benefit should be recognized.

Which of the following statements about ASC 740 as it relates to uncertain tax positions is true?

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