Question 1

Income tax allocation is grounded in the matching concept.

Accepted Answer

A) True 
 B)False  True

Question 2

Explain how comprehensive allocation differs from partial allocation.

Accepted Answer

With comprehensive allocation, tax allocation must take place as long as timing differences arise, despite the possibility of relevant circumstantial differences. Thus, comprehensive allocation is an example of rigid uniformity.
Under partial allocation, only those deferred credits that can reasonably be expected to reverse in the foreseeable future on an aggregate basis are recorded on the books. Thus, income tax expense for a given year is defined as the total tax costs attributable to the given year's operations, costs that will be levied against the firm, both in the current and future years, on a gross or aggregate basis. The resulting deferred tax credit is more clearly definable as a liability since it represents the amount expected to be paid in the future. Partial allocation is an example of finite uniformity.

Question 3

The most important application of income tax allocation is the use of accelerated depreciation for tax purposes and straight-line depreciation for financial reporting.

Accepted Answer

A) True 
 B)False  True

Question 4

Which of the following would create a permanent difference between published statements and tax returns?

Accepted Answer

A)  Municipal bond interest income 
B)  Deductible charitable contributions 
C)  MACRS depreciation 
D)  Bad debt expense 
A)  Municipal bond interest income 
B)  Deductible charitable contributions 
C)  MACRS depreciation 
D)  Bad debt expense

Question 5

Amounts recognized as revenue on the financial statements but not yet included in tax income generate deferred tax assets.

Accepted Answer

A) True 
 B)False

Question 6

From an economic standpoint, it appears reasonable that deferred tax liabilities should be shown at their present value.

Accepted Answer

A) True 
 B)False

Question 7

SFAS No. 96 switched from the revenue-expense (matching) orientation of APB Opinion No. 11 to the asset-liability viewpoint.

Accepted Answer

A) True 
 B)False

Question 8

Explain how the matching concept is applied in tax allocation and how this differs from other applications of matching.

Accepted Answer

Matching, as it is employed in tax alloc

Question 9

Which of the following cases would cause the tax liability to be greater than tax expense?

Accepted Answer

A)  Receipt of cash for rent prior to the period in which services are performed 
B)  Income from long-term construction contracts using the percentage-of-completion approach for financial accounting and the completed-contract approach for income taxes 
C)  Installment sale income recognized for financial purposes at the time of sale and when cash is collected for taxes 
D)  Accelerated depreciation for taxes and straight-line depreciation for income taxes 
A)  Receipt of cash for rent prior to the period in which services are performed 
B)  Income from long-term construction contracts using the percentage-of-completion approach for financial accounting and the completed-contract approach for income taxes 
C)  Installment sale income recognized for financial purposes at the time of sale and when cash is collected for taxes 
D)  Accelerated depreciation for taxes and straight-line depreciation for income taxes

Question 10

Which of the following is not a true statement regarding SFAS No. 96?

Accepted Answer

A)  It required the comprehensive allocation approach. 
B)  It was conservative in terms of recognizing deferred tax assets. 
C)  It was issued in 1987 and continued the approach of APB Opinion No. 11. 
D)  SFAS NO. 109 succeeded it in 1992. 
A)  It required the comprehensive allocation approach. 
B)  It was conservative in terms of recognizing deferred tax assets. 
C)  It was issued in 1987 and continued the approach of APB Opinion No. 11. 
D)  SFAS NO. 109 succeeded it in 1992.

Question 11

Which of the following is not a true statement regarding SFAS No. 109?

Accepted Answer

A)  It maintained a comprehensive allocation orientation. 
B)  It requires a matching orientation. 
C)  It has an asset-liability viewpoint. 
D)  It retained the mandatory nature of income tax allocation. 
A)  It maintained a comprehensive allocation orientation. 
B)  It requires a matching orientation. 
C)  It has an asset-liability viewpoint. 
D)  It retained the mandatory nature of income tax allocation.

Question 12

Another term for a timing difference is:

Accepted Answer

A)  Permanent difference. 
B)  Perpetual difference. 
C)  Temporary difference. 
D)  Interim difference. 
A)  Permanent difference. 
B)  Perpetual difference. 
C)  Temporary difference. 
D)  Interim difference.

Question 13

When is tax allocation necessary?

Accepted Answer

A)  When a revenue or expenses reaches the financial statements before it appears on the tax return 
B)  When a revenue or expense reaches the tax return before it appears on the financial statements 
C)  When the tax basis and book basis of assets and liabilities differ 
D)  All of the above 
A)  When a revenue or expenses reaches the financial statements before it appears on the tax return 
B)  When a revenue or expense reaches the tax return before it appears on the financial statements 
C)  When the tax basis and book basis of assets and liabilities differ 
D)  All of the above

Question 14

Under comprehensive allocation, only those deferred credits that can reasonably be expected to reverse in the foreseeable future on an aggregate basis are recorded on the books.

Accepted Answer

A) True 
 B)False

Question 15

Income tax allocation may be used by management to smooth income.

Accepted Answer

A) True 
 B)False

Question 16

Timing differences are now referred to as temporary differences.

Accepted Answer

A) True 
 B)False

Question 17

In SFAS No. 109, the current or noncurrent designation of deferred tax assets and liabilities is determined by:

Accepted Answer

A)  Whether or not the items would reverse in the next tax year. 
B)  The classification of the related asset or liability. 
C)  The amount of aggregate deferred taxes. 
D)  When the item originated. 
A)  Whether or not the items would reverse in the next tax year. 
B)  The classification of the related asset or liability. 
C)  The amount of aggregate deferred taxes. 
D)  When the item originated.

Question 18

Unused tax credits may generate deferred tax assets.

Accepted Answer

A) True 
 B)False

Question 19

Deferred taxes were viewed as liabilities under APB Opinion No. 11.

Accepted Answer

A) True 
 B)False

Question 20

Explain why tax allocation is necessary.

Accepted Answer

Tax allocation is necessary because of t

Income tax allocation is grounded in the matching concept.

Explain how comprehensive allocation differs from partial allocation.

The most important application of income tax allocation is the use of accelerated depreciation for tax purposes and straight-line depreciation for financial reporting.

Which of the following would create a permanent difference between published statements and tax returns?

Amounts recognized as revenue on the financial statements but not yet included in tax income generate deferred tax assets.

From an economic standpoint, it appears reasonable that deferred tax liabilities should be shown at their present value.

SFAS No. 96 switched from the revenue-expense (matching) orientation of APB Opinion No. 11 to the asset-liability viewpoint.

Explain how the matching concept is applied in tax allocation and how this differs from other applications of matching.

Which of the following cases would cause the tax liability to be greater than tax expense?

Which of the following is not a true statement regarding SFAS No. 96?

Which of the following is not a true statement regarding SFAS No. 109?

Another term for a timing difference is:

When is tax allocation necessary?

Under comprehensive allocation, only those deferred credits that can reasonably be expected to reverse in the foreseeable future on an aggregate basis are recorded on the books.

Income tax allocation may be used by management to smooth income.

Timing differences are now referred to as temporary differences.

In SFAS No. 109, the current or noncurrent designation of deferred tax assets and liabilities is determined by:

Unused tax credits may generate deferred tax assets.

Deferred taxes were viewed as liabilities under APB Opinion No. 11.

Explain why tax allocation is necessary.

An Introduction to Accounting Theory

Accounting Theory and Accounting Research

Development of Institutional Structure of Financial Accounting

The Economics of Financial Reporting Regulation

Postulates, Principles, and Concepts

The Search for Objectives

The Fasbs Conceptual Framework

Usefulness of Accounting Information to Investors and Creditors

Uniformity and Disclosure: Some Policy Making Directions

International Accounting

The Balance Sheet

The Income Statement

Statements of Cash Flows

Accounting for Inflation and Changing Prices

Pensions and Other Postretirement Benefits

Leases

Intercorporate Equity Investments

Filters

Exam 15: Income Taxes and Financial Accounting

Income tax allocation is grounded in the matching concept.

Explain how comprehensive allocation differs from partial allocation.

The most important application of income tax allocation is the use of accelerated depreciation for tax purposes and straight-line depreciation for financial reporting.

Which of the following would create a permanent difference between published statements and tax returns?

Amounts recognized as revenue on the financial statements but not yet included in tax income generate deferred tax assets.

From an economic standpoint, it appears reasonable that deferred tax liabilities should be shown at their present value.

SFAS No. 96 switched from the revenue-expense (matching) orientation of APB Opinion No. 11 to the asset-liability viewpoint.

Explain how the matching concept is applied in tax allocation and how this differs from other applications of matching.

Which of the following cases would cause the tax liability to be greater than tax expense?

Which of the following is not a true statement regarding SFAS No. 96?

Which of the following is not a true statement regarding SFAS No. 109?

Another term for a timing difference is:

When is tax allocation necessary?

Under comprehensive allocation, only those deferred credits that can reasonably be expected to reverse in the foreseeable future on an aggregate basis are recorded on the books.

Income tax allocation may be used by management to smooth income.

Timing differences are now referred to as temporary differences.

In SFAS No. 109, the current or noncurrent designation of deferred tax assets and liabilities is determined by:

Unused tax credits may generate deferred tax assets.

Deferred taxes were viewed as liabilities under APB Opinion No. 11.

Explain why tax allocation is necessary.

An Introduction to Accounting Theory

Accounting Theory and Accounting Research

Development of Institutional Structure of Financial Accounting

The Economics of Financial Reporting Regulation

Postulates, Principles, and Concepts

The Search for Objectives

The Fasbs Conceptual Framework

Usefulness of Accounting Information to Investors and Creditors

Uniformity and Disclosure: Some Policy Making Directions

International Accounting

The Balance Sheet

The Income Statement

Statements of Cash Flows

Accounting for Inflation and Changing Prices

Pensions and Other Postretirement Benefits

Leases

Intercorporate Equity Investments

Filters