Question 1

Robinson Company had a net deferred tax liability of $34,340 at the beginning of the year, representing a net taxable temporary difference of $101,000 (taxed at 34 percent) . During the year, Robinson reported pretax book income of $401,000. Included in the computation were favorable temporary differences of $51,000 and unfavorable temporary differences of $20,500. During the year, Congress reduced the corporate tax rate to 21 percent. Robinson's deferred income tax expense or benefit for the current year would be:

Accepted Answer

A)   Net deferred tax benefit of $6,405.
B)   Net deferred tax expense of $6,405.
C)   Net deferred tax benefit of $6,725.
D)   Net deferred tax expense of $6,725.E) None of the above
F) B) and C)

Question 2

Which of the following items is not a permanent book-tax difference?

Accepted Answer

A)   Tax-exempt life insurance proceeds.
B)   Nondeductible meals expense.
C)   Accrued vacation pay liability not paid within the first two and a half months of the next tax year.
D)   Excess tax benefits from the exercise of NQOs.E) B) and C)
F) A) and D)

Question 3

Bruin Company received a $100,000 insurance payment on the death of its company president. The company annually paid $1,000 of nondeductible insurance premiums on the policy. Bruin reported the insurance receipt as income and deducted the premium payments on its books. For ASC 740 purposes, the income and deduction are characterized as:

Accepted Answer

A)   Both are taxable temporary differences.
B)   Both are deductible temporary differences.
C)   The insurance receipt is a favorable permanent difference and the premium payment is an unfavorable permanent difference.
D)   The insurance receipt is a taxable temporary difference and the premium payment is an unfavorable permanent difference.E) None of the above
F) C) and D)

Question 4

A cumulative financial accounting (book) loss over three years (36 consecutive months) likely would be considered significant negative evidence in a valuation allowance analysis.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements best describes the ASC 740 rules related to the disclosure of the components of deferred tax assets and liabilities in the company's income tax note?

Accepted Answer

A)   A publicly traded company should disclose the approximate "tax effect" (dollar amounts)  of all of the components of its deferred tax assets and liabilities in a footnote to the financial statements.
B)   A publicly traded company should disclose the approximate "tax effect" (dollar amounts)  of only those components of its deferred tax assets and liabilities that give rise to a "significant" portion of net deferred tax liabilities and deferred tax assets in a footnote to the financial statements.
C)   A privately held company should disclose the approximate "tax effect" (dollar amounts)  of all of the components of its deferred tax assets and liabilities in a footnote to the financial statements.
D)   A privately held company should disclose the approximate "tax effect" (dollar amounts)  of only those components of its deferred tax assets and liabilities that give rise to a "significant" portion of net deferred tax liabilities and deferred tax assets in a footnote to the financial statements.ESSAY. Write your answer in the space provided or on a separate sheet of paper.89)  Gull Corporation reported pretax book income of $2,000,000. Included in the computation were favorable temporary differences of $300,000, unfavorable temporary differences of $200,000, and favorable permanent differences of $50,000. Compute Gull's current income tax expense or benefit.E) B) and C)
F) A) and C)

Question 6

Which of the following statements best describes the ASC 740 process for evaluating a company's uncertain tax positions?

Accepted Answer

A)   ASC 740 requires a company to complete a two-step analysis every time it evaluates its uncertain tax positions.
B)   ASC 740 requires a company to complete Step 2 (measurement)  in its evaluation of its uncertain tax positions only if it is more likely than not that its tax position will be sustained on its merits (recognition) .
C)   ASC 740 allows a company to take into account the probability of audit by a tax authority in Step 1 (measurement)  in its evaluation of its uncertain tax positions.
D)   ASC 740 allows a company to record a tax benefit from an uncertain tax position only if it is probable the benefit will be sustained on audit by a tax authority.E) A) and D)
F) B) and C)

Exam 6: Accounting for Income Taxes

Correct Answer
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Which of the following items is not a permanent book-tax difference?

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Which of the following statements best describes the ASC 740 rules related to the disclosure of the components of deferred tax assets and liabilities in the company's income tax note?

Correct Answer
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A cumulative financial accounting (book) loss over three years (36 consecutive months) likely would be considered significant negative evidence in a valuation allowance analysis.

Correct Answer
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Correct Answer
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Which of the following statements best describes the ASC 740 process for evaluating a company's uncertain tax positions?

Correct Answer
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Exam 6: Accounting for Income Taxes

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Which of the following items is not a permanent book-tax difference?

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Which of the following statements best describes the ASC 740 rules related to the disclosure of the components of deferred tax assets and liabilities in the company's income tax note?

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A cumulative financial accounting (book) loss over three years (36 consecutive months) likely would be considered significant negative evidence in a valuation allowance analysis.

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Correct AnswerverifiedShow Answer

Which of the following statements best describes the ASC 740 process for evaluating a company's uncertain tax positions?

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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