Question 1

The presentation of the combination or "offsetting" of noncurrent deferred tax assets and liabilities is

Accepted Answer

A)  seldom allowed in financial reporting 
B)  required by FASB because of the close relationship between deferred tax assets and liabilities 
C)  required by FASB to avoid the detailed analysis necessary for more refined classification methods 
D)  all of the above

Question 2

As of December 31, 2014, the Williamsburg Company reported a deferred tax asset of $60,000 related to accrued, unpaid warranty costs. However, since profits have been declining, Williamsburg decides that it is more likely than not that $24,000 of the deferred tax asset will not be realized. The entry to record the valuation allowance would include a

Accepted Answer

A)  debit to Income Tax Expense for $60,000 
B)  credit to Income Tax Expense for $24,000 
C)  debit to Allowance to Reduce Deferred Tax Asset to Realizable Value for $24,000 
D)  credit to Allowance to Reduce Deferred Tax Asset to Realizable Value for $24,000

Question 3

Interperiod tax allocation is required for all of the following situations except

Accepted Answer

A)  warranty expenses that are expensed in the year of sale for accounting purposes but are deductible in the year of payment for tax purposes 
B)  percentage depletion that exceeds cost depletion for the current period 
C)  MACRS depreciation for tax purposes and straight-line method for accounting purposes 
D)  installment sales method for tax purposes and accrual method for accounting purposes

Question 4

The recognition of gross profit on installment sales at point of sale for financial reporting purposes but reporting the profit when the cash is received for income tax purposes results in deferred taxes reported in which section of the balance sheet?

Accepted Answer

A)  current liabilities section 
B)  current assets section 
C)  noncurrent liabilities section 
D)  noncurrent assets section

Question 5

Temporary differences arise when expenses or losses are deducted to compute taxable income

Accepted Answer

A)  I 
B)  II 
C)  III 
D)  IV

Question 6

Rehobeth Company's taxable income and other financial data for 2014 are presented below:

Required: a.Calculate Rehobeth Company's 2014 pretax financial income.
b.For each item, explain why there is a difference, if any exists, between how it is treated for taxable income purposes and pretax financial income.

Accepted Answer

The answer of Rehobeth Company's taxable income and other financial...

Question 7

On December 31, 2014, the Town Hall Company had a deferred tax liability balance of $12,570, arising from an excess of MACRS depreciation for tax purposes over straight-line depreciation for accounting purposes. The tax effects of that timing difference are expected to reverse in the following years: 
 On January 27, 2015, Congress raised the effective income tax rate to 38% for all future years, including the current year, 2015.
Required:
Prepare the entry to record any adjustments necessary due to the income tax rate increase on January 27, 2015.

Accepted Answer

The answer of On December 31, 2014, the Town Hall...

Question 8

What is intraperiod tax allocation?

Accepted Answer

The answer of What is intraperiod tax allocation?...

Exam 18: Accounting for Income Taxes

The presentation of the combination or "offsetting" of noncurrent deferred tax assets and liabilities is

Interperiod tax allocation is required for all of the following situations except

The recognition of gross profit on installment sales at point of sale for financial reporting purposes but reporting the profit when the cash is received for income tax purposes results in deferred taxes reported in which section of the balance sheet?

Temporary differences arise when expenses or losses are deducted to compute taxable income

What is intraperiod tax allocation?