23: Taxes

Question 1

Income tax expense is recorded on?

Answer 1

Financial reports

Question 2

Taxes payable is records the value from the?

Answer 2

Tax returns

Question 3

The taxes a company must pay in the immediate future are

Answer 3

taxes payable

Question 4

Using the straight-line method of depreciation for reporting purposes and accelerated depreciation for tax purposes would most likely result in a

Answer 4

temporary difference

Question 5

When accounting standards require an asset to be expensed immediately but tax rules require the item to be capitalized and amortized, the company will most likely record

Answer 5

deferred tax asset

Question 6

A company incurs a capital expenditure that may be amortized over five years for accounting purposes, but over four years for tax purposes. The company will most likely record

Answer 6

deferred tax liability

Question 7

the income based upon IRS rules that determines taxes due and is used for tax reporting

Answer 7

taxable income
income tax payable

Question 8

A temporary difference between pretax income reported in a firm’s financial statements and taxable income the firm reports to the tax authorities results in

Answer 8

deferred tax item

Question 9

The net taxable loss that can be used to reduce taxable income in the future

Answer 9

tax loss carryforward

Question 10

Reserve against deferred tax assets based on the likelihood that those assets will not be realized

Answer 10

Valuation allowance

Question 11

Reflect the difference in tax expense (reporting) and taxes payable (tax return) that are expected to be recovered from future operations

Answer 11

Deferred tax assets

Question 12

If timing differences that give rise to a deferred tax liability are not expected to reverse, then the deferred tax:

Answer 12

should be considered an increase in equity

Question 13

US GAAP prohibits the revaluation of _____, which is the source of differences in income tax expense for GAAP and IFRS

Answer 13

PPE

Question 14

The deferred tax liability should be excluded from both debt and equity when both _____ and _____ resulting from the reversals of temporary differences are uncertain

Answer 14

the amounts and timing of tax payments

Question 15

When DTA > DTL, and the tax rate increases, what happens to income tax expense?

Answer 15

An increase in tax rate will increase both DTAs and DTLs, but since the DTA > DTL the net effect for an increase in tax rate will decrease tax expense