ACCOUNTING FOR INCOME TAXES
Major reasons for disclosure of deferred income tax information is (are)
better assessment of quality of earnings.
better predictions of future cash flows.
that it may be helpful in setting government policy.
all of these.
Taxable income of a corporation
differs from accounting income due to differences in intraperiod allocation between the two methods of income determination. b.
differs from accounting income due to differences in interperiod allocation and permanent differences between the two methods of income determination.
is based on generally accepted accounting principles.
is reported on the corporation's income statement.
Interperiod income tax allocation causes
tax expense shown on the income statement to equal the amount of income taxes payable for the current year plus or minus the change in the deferred tax asset or liability balances for the year. b.
tax expense shown in the income statement to bear a normal relation to the tax liability. c.
tax liability shown in the balance sheet to bear a normal relation to the income before tax reported in the income statement. d.
tax expense in the income statement to be presented with the specific revenues causing the tax.
Interperiod tax allocation results in a deferred tax liability from a.
an income item partially recognized for financial purposes but fully recognized for tax purposes in any one year. b.
the amount of deferred tax consequences attributed to temporary differences that result in net deductible amounts in future years. c.
an income item fully recognized for tax and financial purposes in any one year. d.
the amount of deferred tax consequences attributed to temporary differences that result in net taxable amounts in future years.
Interperiod income tax allocation procedures are appropriate when a.
an extraordinary loss will cause the amount of income tax expense to be less than the tax on ordinary net income. b.
an extraordinary gain will cause the amount of income tax expense to be greater than the tax on ordinary net income. c.
differences between net income for tax purposes and financial reporting occur because tax laws and financial accounting principles do not concur on the items to be recognized as revenue and expense. d.
differences between net income for tax purposes and financial reporting occur because, even though financial accounting principles and tax laws concur on the item to be recognized as revenues and expenses, they don't concur on the timing of the recognition.
Renner 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 Renner 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.
Which of the following will not result in a temporary difference?
Product warranty liabilities
Advance rental receipts
All of these will result in a temporary difference.
A company uses the equity method to account for an investment. This would result in what type of difference and in what type of deferred income tax?
Type of Difference
Tax rates other than the current tax rate may be used to calculate the deferred income tax amount on the balance sheet if
it is probable that a future tax rate change will occur.
it appears likely that a future tax rate will be greater than...
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