CHAPTER 19 ACCOUNTING FOR INCOME TAXES

| November 9, 2018

21.
Taxable
income of a corporation

a.
differs
from accounting income due to differences in intraperiod allocation
between the two methods of income determination.
b.
differs
from accounting income due to differences in interperiod allocation and
permanent differences between the two methods of income determination.
c.
is
based on generally accepted accounting principles.
d.
is
reported on the corporation’s income statement.

22 Taxable income of a corporation
differs from pretax financial income because of

Permanent

Temporary

Differences

Differences

a.

No

No

b.

No

Yes

c.

Yes

Yes

d.

Yes

No

23.
The
deferred tax expense is the

a.
increase
in balance of deferred tax asset minus the increase in balance of deferred tax
liability.
b.
increase
in balance of deferred tax liability minus the increase in balance of deferred
tax asset.
c.
increase
in balance of deferred tax asset plus the increase in balance of deferred tax
liability.

d.
decrease
in balance of deferred tax asset minus the increase in balance of deferred tax
liability.

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19 – 8 Test Bank for Intermediate Accounting,
Fourteenth Edition
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24.
Machinery
was acquired at the beginning of the year. Depreciation recorded during the
life of the machinery could result in

Future

Future

Taxable Amounts

Deductible
Amounts

a.

Yes

Yes

b.

Yes

No

c.

No

Yes

d.

No

No

P25. A temporary
difference arises when a revenue item is reported for tax purposes in a

period

After it is reported

Before it is reported

in financial income

in
financial income

a.

Yes

Yes

b.

Yes

No

c.

No

Yes

d.

No

No

S26. At the December 31, 2012 balance sheet date, Unruh
Corporation reports an accrued receivable for financial reporting purposes but
not for tax purposes. When this asset is recovered in 2013, a future taxable
amount will occur and

a.
pretax
financial income will exceed taxable income in 2013.
b.
Unruh
will record a decrease in a deferred tax liability in 2013.
c.
total
income tax expense for 2011 will exceed current tax expense for 2013.
d.
Unruh
will record an increase in a deferred tax asset in 2013.

P27.
Assuming a 40% statutory tax rate applies to all years involved, which of the
following situations will give rise to reporting a deferred tax liability on
the balance sheet?

I.
A
revenue is deferred for financial reporting purposes but not for tax purposes.

II.
A
revenue is deferred for tax purposes but not for financial reporting purposes.
III. An
expense is deferred for financial reporting purposes but not for tax purposes.
IV. An expense is deferred for tax purposes but not for financial reporting
purposes.

a.
item
II only

b.
items
I and II only
c.
items
II and III only
d.
items
I and IV only

S28. A major
distinction between temporary and permanent differences is
a.
permanent
differences are not representative of acceptable accounting practice.
b.
temporary
differences occur frequently, whereas permanent differences occur only once.
c.
once
an item is determined to be a temporary difference, it maintains that status;
however, a permanent difference can change in status with the passage of time.
d.
temporary
differences reverse themselves in subsequent accounting periods, whereas
permanent differences do not reverse.

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Accounting for Income Taxes

19
– 9

S29. Which of the following are temporary differences that
are normally classified as expenses or losses that are deductible after they
are recognized in financial income?

a.
Advance
rental receipts.
b.
Product
warranty liabilities.
c.
Depreciable
property.
d.
Fines
and expenses resulting from a violation of law.

S30.
Which of the following is a temporary difference classified as a revenue or
gain that is taxable after it is recognized in financial income?

a.
Subscriptions
received in advance.

b.
Prepaid
royalty received in advance.
c.
An
installment sale accounted for on the accrual basis for financial reporting
purposes and on the installment (cash) basis for tax purposes.
d.
Interest
received on a municipal obligation.

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