# 300672 Income Tax Expense 3D Flashcards

1
Q

Zeff Co. prepared the following reconciliation of its pretax financial statement income to taxable income for the year ended December 31, 20X1, its first year of operations:

Pre-tax financial income \$160,000
municipal securities (5,000)
Long-term loss accrual in excess
of deductible amount 10,000
Depreciation in excess of financial
statement amount (25,000)
Taxable income \$140,000
========
Zeff’s tax rate for 20X1 is 40%.

In its 20X1 income statement, what amount should Zeff report as income tax expense—current portion?

\$52,000

\$56,000

\$62,000

\$64,000

Question #300672

A

\$56,000

Income tax expense is calculated as follows:

Current portion = Taxable income x Tax rate
= \$140,000 x 0.40
= \$56,000

2
Q

Income Tax Expense

A

Income tax expense is the sum of income taxes currently payable or refundable and deferred tax expense (or benefit).

FASB ASC 740-10-30-5

3
Q

2341.01

A

Income taxes represent a unique feature of financial reporting because of the influence of income tax laws on the elements of the financial statements. The current amount of income taxes paid or payable is calculated on the basis of a company’s income tax return, which indicates the required payment of taxes to the government for the current period. Different accounting procedures are frequently employed, however, in the preparation of financial statements. These differences, along with certain other unique aspects of income tax law and generally accepted accounting principles, require the recognition of noncurrent deferred tax assets (DTA) and noncurrent deferred tax liabilities (DTL) on the balance sheet.

4
Q

2341.06

A

The following basic principles are applied in accounting for income taxes at the date of the financial statements:

a. A current tax liability or asset is recognized for the estimated taxes payable or refundable on tax returns for the current year.
b. A deferred tax liability or asset is recognized for the estimated future tax effects attributable to temporary differences and carryforwards.
c. The measurement of current and deferred tax liabilities and assets is based on provisions of the enacted tax law; the effects of future changes in tax laws or rates are not anticipated.
d. The measurement of deferred tax assets is reduced by a valuation allowance if, based on available evidence, some or all of the deferred tax asset balance is not expected to be realized.

5
Q

FASB ASC 740-10-30-2

A