CHAPTER 19 ACCOUNTING FOR INCOME TAXES

| November 9, 2018

1.
Taxable
income is a tax accounting term and is also referred to as income before taxes.

2.
Pretax
financial income is the amount used to compute income tax payable.

3.
Taxable
amounts increase taxable income in future years.

4.
A
deferred tax liability represents the increase in taxes payable in future years
as a result of taxable temporary differences existing at the end of the current
year.

5.
Deductible
amounts cause taxable income to be greater than pretax financial income in the
future as a result of existing temporary differences.

6.
A
deferred tax asset represents the increase in taxes refundable in future years
as a result of deductible temporary differences existing at the end of the
current year.

7.
A
company reduces a deferred tax asset by a valuation allowance if it is probable
that it will not realize some portion of the deferred tax asset.

8.
Companies
should consider both positive and negative evidence to determine whether it
needs to record a valuation allowance to reduce a deferred tax asset.

9.
A
company should add a decrease in a deferred tax liability to income tax payable
in computing income tax expense.

10.
Taxable
temporary differences will result in taxable amounts in future years when the
related assets are recovered.

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