Tax rates other than the current tax rate may be used to calculate the deferred income tax amount on the balance sheet if O it is probable that a future tax rate change will occur. O it appears likely that a future tax rate will be greater than the current tax rate. O the future tax rates have been enacted into law. O it appears likely that a future tax rate will be less than the current tax rate.

Tax rates other than the current tax rate may be used to calculate the deferred income tax amount on the balance sheet if O it is probable that a future tax rate change will occur. O it appears likely that a future tax rate will be greater than the current tax rate. O the future tax rates have been enacted into law. O it appears likely that a future tax rate will be less than the current tax rate.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

Tax rates other than the current tax rate may be used to calculate the deferred income tax amount on the balance sheet if
O it is probable that a future tax rate change will occur.
O it appears likely that a future tax rate will be greater than the current tax rate.
O the future tax rates have been enacted into law.
O it appears likely that a future tax rate will be less than the current tax rate.

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Calculate the federal income tax liability, marginal tax rate, and average tax rate for each of the following scenarios. Assume the following for all scenarios: all income is traditionally earned, the maximum allowable standard deduction is taken, and no other deductions/credits are applied
A deferred tax liability uses a. Expected future tax law, regardless of whether those expected laws have been enacted b. Current tax laws, unless enacted future tax laws are different c. Either current or expected future tax laws, regardless of whether those expected laws have been enacted. d. The current tax laws, regardless of expected or enacted future tax laws
Assuming that taxes are to be raised, which tax increase would be least detrimental to long term economic growth, a GST/HST increase or an increase in income tax? Assume that either of the increases would be revenue neutral, i.e., the federal government would take in the same amount of revenue with either tax that is raised.
QUESTION 4 Which of the following allow a tax filer to legally reduce the amount of tax owed? Select all that apply. O A. The standard deduction. B. Tax returns. C. Tax evasion. D. Tax exemption. E. FICA taxes paid. F. Tax credits. G. Itemized deductions. QUESTION 5 Which of the following best describes taxable income? O A. The sum of your adjusted gross income and earned income tax credit. B. The sum of your wage income, unemployment benefits, and interest. C. The amount of income on which taxes were withheld by your employer. D. The amount of income you have after subtracting allowable deductions and exemptions.
How might a reduction in future tax rates affect deferred tax assets in a way that reduces current net income?
The current federal income tax structure is progressive in nature. First, explain what that means. Second, regarding the proposal for a "flat tax", comment on both justification for and major obstacles to enactment.
Of the following, the most likely effect of an increase in income tax rates would be to: A) Decrease the savings rate B) Decrease the supply of loanable funds C) Increase interest rates a. All statements are correct. b. Only one statement is correct. c. Only one statement is incorrect.
If the current tax expense is greater than the total income tax expense during the period, there must be a deferred tax benefit. TRUE OR FALSE
Which of the following will tend to INCREASE the benefit of the interest tax shield given a progressive tax rate structure?I An increase in tax ratesII A large tax loss carry forwardIII A large depreciation tax deduction IV A sizeable increase in taxable incomeA) I and III onlyB) I and IV onlyC) II and III onlyD) I, II, III and IV.
Are deferred taxes an unfair loophole that must be closed? What are the specific concerns that have been expressed over the years and do you see the rules surrounding deferred taxes changing in the future?
Valuation allowances reduce deferred tax liabilities to the amount that is more likely than not to be payable in the future. O True False
Which of the following are true about Deferred Tax Liabilities? (check all that apply) In the future, tax rules require bigger expenses than GAAP Initially, tax rules require smaller expenses than GAAP In the future, tax rules require smaller expenses than GAAP They represent an obligation to make higher tax payments in the future Initially, tax rules require bigger expenses than GAAP