ACC 440

Question 1

Temporary difference

Answer 1

Arises when a revenue item is reported for tax purposes in a period before or after it is reported in financial income

Question 2

Deferred tax assets

Answer 2

Result in deductible amounts in the future

Question 3

Deferred tax liabilities

Answer 3

Result in taxable amounts in the future

Question 4

A revenue is deferred for tax purposes but not financial reporting purposes.

Answer 4

Deferred tax liability

Question 5

An expense is deferred for financial reporting purposes but not for tax purposes

Answer 5

Deferred tax liability

Question 6

Revenues or gains are reported on the income statement now but on the tax return later

Answer 6

Deferred tax liability

Question 7

Expenses are reported on the income statement now but on the tax return later

Answer 7

Deferred tax asset

Question 8

Revenues are reported on the tax return now but on the income statement later

Answer 8

Deferred tax asset

Question 9

Expenses are reported on the tax return now but on the income statement later

Answer 9

Deferred tax liability

Question 10

Operating loss carryback

Answer 10

When a company uses a NOL to offset previous taxable income

Question 11

Operating loss carry forward

Answer 11

When a company uses a NOL to offset future taxable income

Question 12

When a company sells property and leases it back, any gain on the sale should be ___________

Answer 12

Deferred and recognised as income over term of the lease

Question 13

Amortisation of Pension gain/loss

Answer 13

(Beg. Bal. AOCI Gain/Loss -
Expected return)/
Remaining service life for all employees

Question 14

Amortisation of prior service cost

Answer 14

AOCI prior service cost/

Remaining service life for prior service amortization

Question 15

Service cost/ Interest cost JE

Answer 15

Dr Annual Pension Expense

Cr PBO

Question 16

Actual return JE

Answer 16

Cr Annual Pension Expense

Dr Plan Assets

Question 17

Expected return

Answer 17

Plan assets x expected rate of return

Question 18

Unexpected return JE

Answer 18

Dr/Cr Annual Pension Expense

Dr/Cr OCI Pension Gain/Loss

Question 19

Amortization of Prior service cost JE

Answer 19

Dr Pension Expense

Cr OCI Prior service cost

Question 20

Amortization of Pension gain/loss JE

Answer 20

Dr annual pension expense

Cr OCI Pension gain/loss

Question 21

Actuarial gain/loss, Gain/Loss on PBO

Answer 21

Dr/Cr OCI Pension Gain/Loss

Dr/Cr PBO

Question 22

Contributions JE

Answer 22

Cr Cash

Dr Plan Assets

Question 23

Benefits Paid JE

Answer 23

Dr PBO

Cr Plan Assets

Question 24

Closing entries OCI to AOCI

Answer 24

Cr/Dr Pension Expense + JE’s add.
Cr/Dr OCI

Cr/Dr OCI
Cr/Dr AOCI

Question 25

Reporting income and tax on financial statement

Answer 25

Pretax financial income | Income tax expense

Question 26

Reporting income and tax on tax return

Answer 26

Taxable income | Income taxes payable

Question 27

Direct financing lease

Answer 27

Lessor is not a manufacturer or dealer, FV of asset is lessor’s cost

Question 28

Sales type lease

Answer 28

Lessor is a dealer, FV of asset is its normal selling price Typically higher than cost of asset

Question 29

Bargain purchase option

Answer 29

The option for the lesser the option to purchase the leases property at a bargain price

Question 30

An accrued receivable reported for financial reporting but not for tax purposes would cause a ________

Answer 30

Decrease in deferred tax liability

Question 31

Difference between a temporary and permanent difference

Answer 31

Temporary differences reverse themselves in subsequent accounting periods

Question 32

Revenues are taxable after they are recognised in financial income

Answer 32

Deferred tax liability

Question 33

Expenses are deductible after they are recognised in financial income

Answer 33

Deferred tax asset

Question 34

Revenues are taxable before they are recognised in financial income

Answer 34

Deferred tax asset

Question 35

Expenses are deductible before they are recognised in financial income

Answer 35

Deferred tax liability