CHAPTER 19 ACCOUNTING FOR INCOME TAXES

| November 9, 2018

40.
Recognition
of tax benefits in the loss year due to a loss carryforward requires

a.
the
establishment of a deferred tax liability.
b.
the
establishment of a deferred tax asset.
c.
the
establishment of an income tax refund receivable.
d.
only
a note to the financial statements.

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Accounting for Income Taxes 19 – 11
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42.
Recognizing
a valuation allowance for a deferred tax asset requires that a company

a.
consider
all positive and negative information in determining the need for a valuation
allowance.
b.
consider
only the positive information in determining the need for a valuation
allowance.
c.
take
an aggressive approach in its tax planning.
d.
pass
a recognition threshold, after assuming that it will be audited by taxing
authorities.

43.
Uncertain
tax positions

I.
Are positions for which the tax authorities may disallow a deduction in whole
or in part.
II.
Include instances in which the tax law is clear and in which the company
believes an audit is likely.

III.
Give rise to tax expense by increasing payables or increasing a deferred tax
liability.
a.
I,
II, and III.
b.
I
and III only.
c.
II
only.
d.
I
only.

44.
With
regard to uncertain tax positions, the FASB requires that companies recognize a
tax benefit when

a.
it
is probable and can be reasonably estimated.
b.
there
is at least a 51% probability that the uncertain tax position will be approved
by the taxing authorities.

c.
it
is more likely than not that the tax position will be sustained upon audit.
d.
Any
of the above exist.

45.
Major
reasons for disclosure of deferred income tax information is (are)

a.
better
assessment of quality of earnings.
b.
better
predictions of future cash flows.
c.
that
it may be helpful in setting government policy.
d.
all
of these.

46.
Accounting
for income taxes can result in the reporting of deferred taxes as any of the
following except
a.
a
current or long-term asset.
b.
a
current or long-term liability.
c.
a
contra-asset account.
d.
All
of these are acceptable methods of reporting deferred taxes.

47.
Deferred
taxes should be presented on the balance sheet

a.
as
one net debit or credit amount.
b.
in
two amounts: one for the net current amount and one for the net noncurrent
amount.
c.
in
two amounts: one for the net debit amount and one for the net credit amount.
d.
as
reductions of the related asset or liability accounts.

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19 – 12 Test Bank
for Intermediate Accounting, Fourteenth Edition
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48.
Deferred
tax amounts that are related to specific assets or liabilities should be
classified as current or noncurrent based on
a.
their
expected reversal dates.
b.
their
debit or credit balance.
c.
the
length of time the deferred tax amounts will generate future tax deferral
benefits.
d.
the
classification of the related asset or liability.

49.
Tanner,
Inc. incurred a financial and taxable loss for 2013. Tanner therefore decided
to use the carryback provisions as it had been profitable up to this year. How
should the amounts related to the carryback be reported in the 2013 financial
statements?
a.
The
reduction of the loss should be reported as a prior period adjustment.
b.
The
refund claimed should be reported as a deferred charge and amortized over five
years.

c.
The
refund claimed should be reported as revenue in the current year.
d.
The
refund claimed should be shown as a reduction of the loss in 2013.

S50.
A deferred tax liability is classified on the balance sheet as either a current
or a noncurrent liability. The current amount of a deferred tax liability
should generally be

a.
the
net deferred tax consequences of temporary differences that will result in net
taxable amounts during the next year.
b.
totally
eliminated from the financial statements if the amount is related to a
noncurrent asset.
c.
based
on the classification of the related asset or liability for financial reporting
purposes.

d.
the
total of all deferred tax consequences that are not expected to reverse in the
operating period or one year, whichever is greater.

51.
All
of the following are procedures for the computation of deferred income taxes except
to

a.
identify
the types and amounts of existing temporary differences.
b.
measure
the total deferred tax liability for taxable temporary differences.
c.
measure
the total deferred tax asset for deductible temporary differences and operating
loss carrybacks.
d.
All
of these are procedures in computing deferred income taxes.

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