Reading 38: Income Taxes-LOS a 习题精选 between, valuation, including, accounting, 2011

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Session 9: Financial Reporting and Analysis: Inventories, Long-lived Assets, Income Taxes, and Non-current Liabilities
Reading 38: Income Taxes

LOS a: Explain the differences between accounting profit and taxable income, and define key terms, including deferred tax assets, deferred tax liabilities, valuation allowance, taxes payable, and income tax expense.

 

 

Which of the following best describes valuation allowance? Valuation allowance is a reserve:

A) created when deferred tax assets are greater than deferred tax liabilities.

B) against deferred tax assets based on the likelihood that those assets will not be realized.

C) against deferred tax liabilities based on the likelihood that those liabilities will be paid.

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Valuation allowance is a reserve against deferred tax assets based on the likelihood that those assets will not be realized. Deferred tax assets reflect the difference in tax expense and taxes payable that are expected to be recovered from future operations.

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If a firm uses accelerated depreciation for tax purposes and straight-line depreciation for financial reporting, which of the following results is least likely?

A) Income tax expense will be greater than taxes payable.

B) A temporary difference will result between tax and financial reporting.

C) A permanent difference will result between tax and financial reporting.

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A permanent difference between tax and financial reporting is a difference that is expected to not reverse itself. Under normal circumstances, the effects of the different depreciation methods will reverse.

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A tax loss carryforward is best described as the:

A) net taxable loss that can be used to refund paid taxes from the previous year.

B) net taxable loss that can be used to reduce taxable income in the future.

C) difference of deferred tax liabilities and deferred tax assets.

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A tax loss carryforward is the net taxable loss that can be used to reduce taxable income in the future.

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The difference between income tax expense and taxes payable is a:

A) deferred tax liability.

B) deferred income tax expense.

C) timing difference.

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Taxes payable is defined as the taxes due to the government as determined by taxable income and the tax rate, while income tax expense is the amount actually recognized on the income statement. Deferred income tax expense is defined as the difference in income tax expense and taxes payable. Each individual deferred item is expected to be paid (or recovered) in future years.

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Which of the following statements about tax deferrals is NOT correct?

A) A deferred tax liability is expected to result in future cash outflow.

B) Taxes payable are determined by pretax income and the tax rate.

C) Income tax paid can include payments or refunds for other years.

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Taxes payable are the taxes due to the government and are determined by taxable income and the tax rate. Note that pretax income is income before tax expense and is used for financial reporting. Taxable income is the income based upon IRS rules that determines taxes due and is used for tax reporting.

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Which of the following statements is CORRECT? Income tax expense:

A) includes taxes payable and deferred income tax expense.

B) is the amount of taxes due to the government.

C) is the reported net of deferred tax assets and liabilities.

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Income tax expense is defined as expense resulting from current period pretax income. It includes taxes payable and deferred income tax expense. Taxes payable are the amount of taxes due the government.