Using straight-line depreciation for financial reporting purposes and MACRS for tax purposes in the first year of an asset's life creates a: a. Future deductible amount b. Permanent difference not requiring inter-period tax allocation c. Deferred tax asset d. Deferred tax liability

Using straight-line depreciation for financial reporting purposes and MACRS for tax purposes in the first year of an asset's life creates a: a. Future deductible amount b. Permanent difference not requiring inter-period tax allocation c. Deferred tax asset d. Deferred tax liability

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 1P: Definitions The FASB has defined several terms in regard to accounting for income taxes. Below are...

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1. The amount of income taxes that relate to financial income subject to tax is reported on the income statement as A. long-term deferred income taxes (credit) C. income tax expense B. current deferred income taxes (debit) D. income tax payable 2. An item that would create a permanent difference in pretax financial and taxable income would be A. using accelerated depreciation for tax purposes & straight line depreciation for book purposes. B. using the percentage of completion method on long-term construction contracts. C. purchasing equipment previously leased with an operating lease in prior years. D. paying fines for violation of laws. 3. Which of the following is the most likely item to result in a deferred tax asset? A. using completed contract method of recognizing construction revenue tax purposes, but using percentage of completion method for financial reporting purposes. B. using accelerated depreciation for tax purposes but straight-line depreciation for accounting purposes.…
A valuation allowance for deferred tax assets Select one: a. Is required when future deductible amounts are expected to be applied against future taxable income. b. Requires evidence that it is more likely than not that none of the deferred tax asset will be realized. c. Is a contra asset account shown on the tax return. d. Is likely to be recognized if a company expects losses in early future years.
Using the straight-line method of depreciation for reporting purposes and accelerateddepreciation for tax purposes would most likely result in a:A . valuation allowance.B . deferred tax asset.C . temporary diff erence.
Save & Exit Subm Two independent situations are described below. Each involves future deductible amounts and/or future taxable amounts produced by temporary differences: SITUATION Taxable income Amounts at year-end: Future deductible amounts 2. $46,000 $86,000 5,600 10,600 0 5,600 Future taxable amounts Balances at beginning of year, dr (cr): Deferred tax asset, Deferred tax liability $ 1,000 $ 3,180 0 1,000 The enacted tax rate is 30% for both situations. Required: For each situation determine the: SITUATION 2. (a.) Income tax payable currently. (b.) Deferred tax asset - balance at year-end. (c.) Deferred tax asset change dr or (cr) for the year. (d.) Deferred tax liability - balance at year-end. (e.) Deferred tax liability change dr or (cr) for the year. (f.) Income tax expense for the year. Next > 31 of 39
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
1. A temporary difference that will result in future deductible amounts and, therefore, will usually give rise to a deferred income tax asset. 2. A temporary difference that will result in future taxable amounts and, therefore, will usually give rise to a deferred income tax liability. 3. A permanent difference. (a) ______ For some assets, straight-line depreciation is used for tax purposes while double-declining balance method is used for financial reporting purposes.(b) ______ Warranty expenses are accrued when the sale is made, but cannot be deducted until the work is actually performed.(c) ______ The company uses the percentage of completion method to record revenue on long-term contracts for financial reporting purposes, but the completed contract method is used for tax purposes.(d) ______ Accelerated depreciation is used for tax purposes, and the straight-line depreciation method is used for financial reporting purposes, for some equipment.(e) ______ A landlord collects some…
(Terminology, Relationships, Computations, Entries)InstructionsComplete the following statements by filling in the blanks.(a) In a period in which a taxable temporary difference reverses, the reversal will cause taxable income to be _______ (less than, greater than) pretax financial income.(b) If a $76,000 balance in Deferred Tax Asset was computed by use of a 40% rate, the underlying cumulative temporary difference amounts to $_______.(c) Deferred taxes ________ (are, are not) recorded to account for permanent differences.(d) If a taxable temporary difference originates in 2017, it will cause taxable income for 2017 to be ________ (less than, greater than) pretax financial income for 2017.(e) If total tax expense is $50,000 and deferred tax expense is $65,000, then the current portion of the expense computation is referred to as current tax _______ (expense, benefit) of $_______.(f) If a corporation’s tax return shows taxable income of $100,000 for Year 2 and a tax rate of 40%, how…
For each item below, indicate whether it involves: 1. A temporary difference that will result in future deductible amounts and, therefore, will usually give rise to a deferred income tax asset. 2. A temporary difference that will result in future taxable amounts and, therefore, will usually give rise to a deferred income tax liability. 3. A permanent differerence Use the appropriate number to indicate your answer for each. A. For some assets, straight-line depreciation is used for tax purposes while double-declining balance method is used for financial reporting purposes. B. Warranty expenses are accrued when the sale is made, but cannot be deducted until the work is actually C. The company uses the percentage of completion method to record revenue on long-term contracts for financial reporting purposes, but the completed contract method is used for tax purposes. D. Accelerated depreciation is used for tax purposes, and the straight-line depreciation method is used for financial…
Which of the following is an example of a temporary difference which would result in a deferred tax asset? Investment gains recognized earlier for accounting purposes than for tax purposes Use of a longer depreciation period for accounting purposes than is used for tax purpose Use of straight-line method for accounting purposes and an accelerated rate for tax purposes Rent revenue collected in advance included in taxable income before it is included in accounting income
The use of accelerated depreciation for tax purposes and straight-line depreciation for accounting purposes results in: O The asset being fully depreciated for tax purposes in half the time it takes to become fully depreciated for accounting purposes. O A larger amount of depreciation expense shown on the tax return than on the income statement over the asset's useful life. O A larger amount of depreciation expense shown on the income statement than on the tax return in the last year of the asset's useful life. O A loss on the sale of the asset in question if it is sold for its book value before its useful life expires.
Temporary book-tax differences include (mark all that apply) A. Accrued income B. Accrued expenses c. Depreciation on fixed assets D. E. Tax credits F. All of these G. None of these Net operating losses