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Flashcards in Income Taxes Deck (39)
1

Deferred income tax expense or benefit is equal to the sum of net changes in deferred tax assets and deferred tax liabilities? TF

True

2

FAS 109 (Acctg for income taxes) is based on what acctg concept?

Asset/Liability Approach

3

How do permanent differences distort the effective tax rate?

Permanent differences subtract directly from NI. Tax is then levied on the reduced NI at its amount before the difference causing the effective tax rate to be greater than the statutory tax rate.

4

Are footnotes required if the effective tax rate the the statutory tax rate differ?

Yes

5

What are some common permanent differences, and what is their treatment in dealing with taxable income?

Tax exempt interest
Fines and penalties
Life insurance policies on key employees
Dividends received deductions
Depletion
NON DEDUCTIBLE

6

Temporary differences are recognized in different amounts for books and tax in a given year. TF

True

7

What are the two broad types of temporary differences?

Deferred Tax Assets and Deferred tax liabilities

8

Deferred tax assets represent prepayments to the IRS. TF

True

9

Deferred tax liabilities represent prepayments to the IRS. TF

False. The represent amounts owed in future periods.

10

Best way to solve DTA DTL problems?

JE. Dr. Income tax expense (Total) dr. DTA or cr. DTL cr. Cash to IRS or cr. Income tax payable

11

Life insurance proceeds on death of an officer should be included when computing taxable income? TF

False, they should be subtracted from taxable income.

12

Income from tax exempt municipal bonds should be included in taxable income? TF

False, note "tax exempt"

13

Excess depreciation should be included in taxable income. TF

False

14

DTLs arise from

Future cash inflows that have yet to be taxed

15

DTAs arise from

Taxes paid on items not due yet

16

Formula for taxable income

Taxable income = Pre tax accounting income +/- originating temp diffs +/- permanent diffs

17

Items that are good for the fin statements create...DTA/DTL

DTLs

18

Items that are bad for the fin statements create...DTA/DTL?

DTAs

19

Expense Items: FS > TAX =

A DTL and is ADDED to pre tax income

20

Expense Items: FS

A DTA and is SUBTRACTED from pre tax income

21

Income Items: FS > TAX =

A DTA and is SUBTRACTED from pre tax income

22

Income Items: FS

A DTL and is ADDED to pre tax income

23

Things that are bad for the FS cause DTAs or DTLs in future periods?

DTAs

24

Things that are good for the FS cause DTAs or DTLs in future periods?

DTLs

25

The future tax rate should be used in computation of the DTA or DTL if...

those are going to be the rates in effect when the future tax consequences will be realized

26

The effective tax rate is the rate you actually pay after taxable income is adjusted. TF

True

27

Life insurance premiums are kept or taken away from NI to arrive at taxable income?

Kept

28

Equity income of an investee is taxable. TF

False

29

In computing a DTL, changes in depreciation are treated prospectively. TF

True, no temporary difference is generated from the PAST years. The temporary differences start from the date of change.

30

On the balance sheet non current DTAs and DTLs are show separately. TF

False, netted and shown as "deferred tax"

31

Current and non current deferred tax assets are NOT netted together for balance sheet disclosure. TF

True

32

For a DTA to be recognized what standard must be met?

More likely than not, 50% or greater

33

Value of the NOL carryforward =

NOL x Tax Rate

34

NOLs can be carried back ___ years and carried forward _____ years.

2, 20

35

Current and non-current tax assets and liabilities are disclosed seperately. TF

True

36

Permanent differences (need/do not need) to be disclosed.

do not need

37

Deferred taxes in dealing with percentage depletion = 0. TF

True

38

Under IFRS DTAs and DTLs can only be netted together if...

The are under the same taxing authority

39

Non Current DTA's and Current DTL's can be netted together. TF

False, Non current and current anythings cant be netted together, must be the same.