Chapter 16 Quiz - ACCT 405 - Glenski

Which of the following computations is required related to accounting for income taxes?
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Which of the following computations is required related to accounting for income taxes?
Deferred tax assets and liabilities based on temporary differences.
_____________________________ will be reported as a temporary difference.
A: Investment expenses incurred to generate tax-exempt income.
B: MACRS used for depreciating equipment.
C: The dividends received deduction.
D: Life insurance proceeds received due to the death of an executive.
B: MACRS used for depreciating equipment
A deferred tax asset is usually generated by:
A: Depreciation early in the life of an asset.
B: Unrealized gain from recording investments at fair value.
C: Subscriptions collected in advance.
D: None of the above.
C: Subscriptions collected in advance.
If a company reports a deferred tax asset, it is due to a:
Future income tax benefit
______________________ will usually cause a permanent difference.
A: The installment method used for sales of property.
B: The depreciation method used for equipment.
C: Interest income on municipal bonds.
D: Percentage-of-completion method for long-term construction contracts.
C: Interest income on municipal bonds.
In reconciling net income to taxable income, interest earned on municipal bonds is:
A permanent difference.
_______________ will usually cause a deferred tax liability.
A: Interest income on municipal bonds.
B: Proceeds from life insurance received due to death of an executive.
C: Prepaid utilities.
D: None of these answer choices are correct.
C: Prepaid utilities
T/F:
A temporary difference originates in one period and reverses, or turns around, in one or more later periods.
True
T/F:
The classification of deferred tax assets is sometimes dependent on when the benefit will be realized.
False
T/F:
When an expense is deducted in year 1 on the tax return but not deducted in the computation of net income on the income statement until year 2, this causes a deferred tax liability.
True
The deferred tax asset's valuation allowance account is reported on the balance sheet as a(an):Contra assetTax rates occasionally change. When this occurs after the deferred tax accounts have been recorded, Generally Accepted Accounting Principles require that:all deferred tax accounts be adjusted to reflect the new tax ratesUnder current tax law a net operating loss typically may be carried forward up to:indefinitelyAssuming no other deferred tax items exist in a particular year, a net operating loss (NOL) carryforward will be shown in the balance sheet at the end of the NOL year as:A noncurrent deferred tax assetFor reporting purposes, current deferred tax assets and current deferred tax liabilities for the same company and tax jurisdiction are:Combined with noncurrent deferred tax assets and noncurrent deferred tax liabilities in the balance sheet to show a single net noncurrent amount.Tax rates change occasionally. The effect of this:Is reflected in income from continuing operations.Recognizing tax benefits in a loss year due to a net operating loss carryforward requires:Creating a deferred tax assetIf a business has a net operating loss carryover:A deferred tax asset is recorded along with any applicable valuation allowance.Related to the individual components of a company's income tax expense, the financial statement disclosure:Usually is included in the disclosure notes.T/F: A net operating loss (NOL) carryforward creates a deferred tax liability that should be classified as current to the extent that the NOL will be recovered in the following year.False