It is legal for a company to use one method of depreciation for tax reporting purposes and a differentmethod for financial reporting purposes. This statement is true or false

Tax authorities frequently permit depreciation to be taken in ways that are more expedited or…

Answered: It is legal for a company to use one…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter18: Accounting For Income Taxes

Section: Chapter Questions

Problem 23GI

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When a company records a deferred tax asset, it may need to also report a valuation allowance if it is “more likely than not” that some portion or all of the deferred tax asset will not be realized. The FASB Accounting Standards Codification represents the single source of authoritative U.S. generally accepted accounting principles. Required: 1. Obtain the relevant authoritative literature on disclosure requirements pertaining to how a firm should determine whether a valuation allowance for deferred tax assets is needed using the FASB’s Codification Research System at the FASB website (www.fasb.org). What is the specific citation that describes the guidelines for determining the disclosure requirements? 2. What are the guidelines?
Which of the following is a temporary difference that normally is recognized for accounting purposes before being reported as an expense for tax purposes? Unearned revenue Product warranty costs Depreciation Fines resulting from violations of the law.
true or false
Explain when a firm may recognize a deferred tax asset under SFAS No. 109. Howshould deferred tax assets that are not expected to be realized be accounted for?
Which of the following statements is NOT correct? A. Taxable income and accounting profit may differ due to differences between the recognition of revenue and expenses for tax and accounting purposes. B. Deferred tax assets must be assessed for the probability of their recovery. Creation of a deferred tax asset or liability occurs only if it reverses at some future date. OC. Deferred tax assets and liabilities may arise due to temporary differences between accounting profit and taxable income. D. Deferred tax liabilities may arise due to permanent differences between accounting profit and taxable income.
When certain expenditures result in tax credits that directly reduce taxes, the companywill most likely record:A . a deferred tax asset.B . a deferred tax liability.C . no deferred tax asset or liability.
Which statement is false?a) Deferred taxes are the product of temporary difference in the recognition ofrevenue and expense for taxable income relative to reported income.b) Deferred taxes arise from the use of the same method of depreciation for tax andreporting purposes.c) Deferred taxes arise when taxes actually paid are less than tax expense reported inthe financial statements.d) Temporary difference causing the recognition of deferred taxes may arise fromthe methods used to account for items such as depreciation, installment sales,leases, and pensions.
A net operating loss occurs when tax-deductible expenses exceed taxable revenues. Tax laws permit the net operating loss to be used to reduce taxable income in future profitable years. How are loss carryforwards recognized for financial reporting purposes?
Which of the following is an example of a temporary difference which would result in a deferred tax asset? a. Rent revenue collected in advance included in taxable income before it is included in accounting income b. Investment gains recognized earlier for accounting purposes than for tax purposes c. Use of straight-line method for accounting purposes and an accelerated rate for tax purposes d. Use of a longer depreciation period for accounting purposes than is used for tax purpose
The definition of gross income in the tax law is: All items specifically listed as income in the tax law All cash payments received for goods provided and services performed All income from whatever source derived All income from whatever source derived unless the income is earned illegally
Which of the following is an acceptable method of accounting under the tax law? The accrual method The hybrid method The cash method All of the above are acceptable None of the above
Which of the following is true? Deposits received in advance to manufacture inventory items give rise to deferred tax assets. Investments in stocks of other companies accounted for using the equity method give rise to temporary differences but not permanent ones. Deferred taxes applying to unrealized gains and losses for trading securities are included in AOCI. A valuation allowance may be subtracted from deferred tax liabilities.

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It is legal for a company to use one method of depreciation for tax reporting purposes and a different method for financial reporting purposes. This statement is true or false