ADMS 3595 Chapter Notes -Haggs, Retained Earnings, Macrs

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pucewildebeest131

2 Nov 2012

School

York University

Department

Administrative Studies

Course

ADMS 3595

Professor

Rebecca Jubis

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Document Summary

Ifrs questions are available at the end of this chapter. Difference due to the equity method of investment accounting. Difference due to unrealized loss on marketable securities. Answer b c b a a b c d b c d c d d d b a. Test bank for intermediate accounting, thirteenth edition d. Answer c c b a d c d c b d d c c. Recognition of tax benefit of a loss carryforward. Recognition of valuation account for deferred tax asset. Recognition of tax benefit with uncertain tax position. Reasons for disclosure of deferred income tax information. Classification of deferred income tax on the balance sheet. Income statement presentation of a tax benefit from nol carryforward. P these questions also appear in the problem-solving survival guide. S these questions also appear in the study guide. *this topic is dealt with in an appendix to the chapter. Calculate book basis and tax basis of an asset.

Related Questions

A. If a $150,000 balance in Deferred Tax Liability was computedby use of a 30% rate, the underlying cumulative temporarydifference amounts to $__________.

B. An income statement that reports current tax benefit of$63,000, and deferred tax expense of $19,000 will report totalincome tax _____________ of$________.

C. If a taxable permanent difference originates in 2012, it willcause taxable income for 2012 tobe _________(less than, greater than) pretax financial income for2012.

D. If the income statement shows total income tax expenses of$186,000 and deferred tax expenses of $45,000, the total taxes dueon the tax return for the period are______________.

E. If total tax expense is $225,000 andthe current expense is $155,000, then the deferred tax_____________ (expense, benefit) is $__________.

F. In a period in which a deductible temporary differencereverses, the reversal will cause taxable income to be __________(less than, greater than) pretax financialincome.

G. A decrease in the Deferred Tax Assets account onthe balance sheet is recorded by a _________ (debit,credit) to the Income Tax Expenseaccount.

H. If a corporationâs âIncome tax payableâ on the balance sheettotals $100,000, the company made estimated payments during theyear totaling $40,000, and the tax rate is 40%, taxable incomeequals $________.

I. A valuation account___________ (reduces, increases) the balance reported in thebalance sheet for a deferred tax asset to the amount expected to berealized.

J. Deferred taxes _________ (are,are not) recorded to account for temporary differences.

Q2. (6 pts),

Assuming constant tax rates, pre-tax book incomeX the tax rate equals ___________________.

Taxes paid in cash for the current year is the tax rateX ____________________.

Q3 (3 pts). A valuation account is used to:

A. reduce a deferred tax liability.

B. reduce a deferred tax asset.

C. increase a deferred tax liability.

D. increase a deferred tax asset.

Q 4 (10 pts.)

4.1 (4 pts.) For each example, indicate whichis higher in the current year, taxable income orpretax income? Assume the company is in its first year ofoperations.

(You must get more than three correct to earn credit.)

Check which is higher for each item:	taxable income	pretax income
A. a balance in the Unearned Rent account at year end.
B. using accelerated depreciation for tax purposes andstraight-line depreciation for book purposes.
C. a fine resulting from violations of OSHA regulations.
D. Installment sales accounted for on an accrual basis.
E. Product warranty liabilities.
F. Interest received on state and municipal obligations.

4.2 (6 pts.) Check only one box for each of thesix items (temporary difference resulting in DTA or DTL; orpermanent difference). Must get more than two correct to getcredit.

	Temporary difference resulting in:		Permanent Difference
	DTA	DTL	Permanent Difference
A. a balance in the Unearned Rent account at year end.
B. using accelerated depreciation for tax purposes andstraight-line depreciation for book purposes.
C. a fine resulting from violations of OSHA regulations.
D. Installment sales accounted for on an accrual basis.
E. Product warranty liabilities.
F. Interest received on state and municipal obligations.

rubyrhinoceros419

The tax rate is 30%

Cougar has pretax accounting income (PAI) of $66,000 in 2016after including the effects of the appropriate items from thefollowing information:

MACRS (tax) depreciation $20,000

Officerâs life insurance premium expense $15,000

Interest revenue on municipal bonds $25,000

Depreciation taken for financial reporting purposes $38,000

Actual product warranty costs deducted for tax purposes$20,000

Excess of accrual-basis financial accounting sales overcash-basis

sales recognized for tax purposes $11,000

Estimated product warranty expense for financial reporting

Purposes $27,000

At the beginning of 2016, Cougar had a deferred tax liability(DTL) balance of $17,250 which reflected a $41,800 taxabletemporary difference related to depreciation and another $15,700taxable temporary difference related to accrual-basis salesdifferences. Cougar had a deferred tax asset (DTA) balance of$14,850 related to a $49,500 deductible temporary differenceresulting from a warranty liability (obligation under warranty)balance at the beginning of the year. The tax rate for 2016 is 30%,but during 2016, Congress changed the enacted tax rate to 34% forall future tax years beginning in 2017.

Required:

1) Compute Cougarâs taxable income for 2016. What are incometaxes payable for 2016?

2) Prepare Cougarâs journal entry to record income tax expensefor 2016 (assume no

valuation allowance existed as of the beginning of the year andis unnecessary at the end

of the year).

3) What is Cougarâs effective tax rate?

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ADMS 3595 Chapter Notes -Haggs, Retained Earnings, Macrs

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