Acct 3120 Exam 3

Question 1

An employer reports the components of pension expense outside the subtotal of income from operations with the exception of:

Answer 1

service cost

Question 2

Which of following is not a characteristic of a qualified pension plan?

Answer 2

It can be limited to highly compensated salaried employees

Question 3

Recognizing tax benefits in a loss year due to a net operating loss carryforward requires:

Answer 3

creating a deferred asset

Question 4

Eligibilty for postretirement health care benefit usually is based on employee’s

Answer 4

age and/or years of service

Question 5

Which of the following is not a way of measuring the pension obligation?

Answer 5

Retiree benefit obligation

Question 6

Of the following common types of temporary differences, which one ordinarily creates a deferred tax asset?

Answer 6

rent received in advance

Question 7

expenditures currently deducted in the tax return but not included with expense in the income statement until subsequent years create deferred tax liabilities

Answer 7

true

Question 8

In reconciling net income to taxable income, interest earned on municipal bonds is:

Answer 8

permanent difference

Question 9

Under current tax law a net operating loss typically may be carried forward up to:

Answer 9

indefinitely

Question 10

The balance of the plan assets can change due to:

Answer 10

investment returns, employer contributions, and the payment of benefits

Question 11

which of following differences between financial accounting and tax accounting ordinarily creates deferred tax liability

Answer 11

depreciation early in the life of an asset

Question 12

a net gain or loss affects pension expense only if it exceeds 10% of the pension benefit obligation or 10% of plan assets, whichever is lower

Answer 12

false

Question 13

Which of the following is not a potential component of pension expense?

Answer 13

retiree benefits paid

Question 14

GAAP regarding accounting for income taxes requires which of the following procedures?

Answer 14

computation of deferred tax assets and liabilities based on temporary differences

Question 15

the postretirement benefit obligation is the:

Answer 15

present value of the estimated benefits during retirement

Question 16

Valuation allowances reduce deferred tax liabilities to the amount that is more likely than not to be payable in the future

Answer 16

false

Question 17

Changes in the enacted tax rates that do not become effective in the current period affect deferred tax accounts only after the new rates take effect

Answer 17

false

Question 18

Which of the following causes temporary difference between taxable and pretax accounting income?

Answer 18

MACRS used for depreciating equipment

Question 19

According yo generally accepted accounting principles, accounting for postretirement benefits other than pensions must adhere to the

Answer 19

accrual basis of accounting

Question 20

the three components of pension expense that are present most often are:

Answer 20

service cost, interest cost, expected return on plan assets

Question 21

If a pension plan is underfunded, the company has a net loss-OCI

Answer 21

false

Question 22

The difference between pension plan assets and the PBO is equal to the funded status of the plan

Answer 22

true

Question 23

of the following temporary differences, which one ordinarily creates a deferred tax asset

Answer 23

accrued warranty expense

Question 24

a deferred tax asset represents a

Answer 24

future income tax benefit

Question 25

which of the following usually results in an increase in a deferred tax asset?

Answer 25

none of these answer choices are correct

Question 26

valuation allowance reduce deferred tax liabilities to the amount that is more likely than not to be payable in the future

Answer 26

false

Question 27

Which of the following would never require reporting deferred tax assets or deferred tax liability

Answer 27

life insurance premiums for the payer’s benefit

Question 28

the effect of change in tax rates

Answer 28

is reflected in income from continuing operations

Question 29

ERISA made major changes in the requirements for pension plan:

Answer 29

Vesting

Question 30

Under current tax law for an industry where NOL carryback is allowed, generally net operating loss may be carried back:

Answer 30

2 years

Question 31

which of the following is not true with regard to pension plans?

Answer 31

a defined contribution pension plan creates a liability for the employer

Question 32

The employer reports the components of pension expense outside the subtotal of income from operations with the exception of:

Answer 32

service cost

Question 33

The PBO is increased by

Answer 33

An increase in the average life expectancy of employees

Question 34

Estimated employee compensation expenses earned during the current period but expected to be paid in the next period causes:

Answer 34

an increase in deferred tax asset