Chapter 10: Payables and Taxes

Question 1

What results in a DTL?

Answer 1

When income under GAAP is greater than Taxable Income = Future Taxable Amount

Question 2

What results in a DTA?

Answer 2

When income under GAAP is less than Taxable Income = Future Deductible Amount

Question 3

When should goodwill be recognized?

Answer 3

Goodwill can only be recognized in a business combination, so when goodwill has been created in the purchase of a business

Question 4

What is a deferred tax expense or benefit?

Answer 4

The net change during the year in an entity’s deferred tax amount

Question 5

What is the deferred tax expense/benefit equation?

Answer 5

Changes in DTL balances +- Changes in DTA balances

Question 6

What is the JE for current income tax expense?

Answer 6

(DB) Income tax expense - current
(CR) Income tax payable

Question 7

What is the JE if the DTL balance increased during the year?

Answer 7

(DB) Income tax expense - deferred
(CR) Deferred tax liability

Question 8

What is the JE if the DTA balance increased during the year?

Answer 8

(DB) Deferred tax asset
(CR) Income tax expense - Deferred

Question 9

What is required if a carryforward results in a future deductible amount?

Answer 9

The recognition of a deferred tax asset.

Question 10

What is the JE required for a future deductible amount resulting from a carryforward?

Answer 10

(DB) Deferred tax asset
(CR) Income tax benefit from loss carryforward

Question 11

When do DTLs arise?

Answer 11

When revenues or gains are recognized under GAAP before they are included in taxable income. Or when expenses or losses are deductible for tax purposes before they are recognized under GAAP.