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C249 CH19
Income Taxes
| Question | Answer |
|---|---|
| Income tax expense is the taxes caused by? | pretax income |
| _______________ income is used to compute income taxes payable, and it is determined using the Internal Revenue Code. | taxable |
| Income before taxes and income for book purposes are both other names for finanical income. | |
| Which of the following can be used to determine pretax financial income? | revenues - expenses |
| True or False: The amount used to compute income taxes payable is called pretax financial income. | False |
| In terms of financial reporting, companies will generally use the ________ method in order to report revenues. | Full accrual |
| Income before taxes and income for book purposes are both other names for ________ finanical income. | pre-tax |
| Which of the following is NOT true of taxable income? It is used to compute income taxes payable. It is determined using the Internal Revenue Code. It is often referred to as income for book purposes. It is a tax accounting term. | It is often referred to as income for book purposes. |
| Pretax financial income is a ___________ term. | Financial reporting |
| True or False: Companies determine taxable income according to the Internal Revenue Code. | True |
| Which of the following is NOT another name for pretax financial income? income for book purposes income before taxes income for financial reporting purposes income for tax purposes | income for tax purposes |
| Subtracting a company’s expenses from their revenues will yeild which of the following? A : pretax financial income B : income tax expense C : pre-taxable income D : net revenue expense | pretax financial income |
| Which of the following do companies generally use for financial accounting to report revenues? A : full cash basis B : modified cash basis C : full accrual method D : cash accrual method | full accrual method |
| How do companies determine taxable income? A : according to GAAP B : according to stock code C : according to FASB D : according to the Internal Revenue Code | according to the Internal Revenue Code |
| True or False: Pretax financial income is a financial reporting term. | True |
| Income tax expense is the taxes caused by A : taxable income B : pretax income C : operating income D : income from continuing operations | pretax income |
| True or False: The amount used to compute income taxes payable is called pretax financial income. | False |
| Horton Company has taxable revenues for 2018 amounting to $120,000. For the same year, their tax expenses are $50,000. The company has a 40% tax rate. Based on this information, what are their income taxes payable? | $28,000 |
| Deductible amounts will __________ taxable income in the years to come. | decrease |
| True or False: Deductible amounts generally work to increase taxable income over the years. | False |
| Which of the following is true of taxable amounts? | They increase taxable income in later years. |
| In later years, _________ amounts increase taxable income. | Taxable |
| True or False: Recording deferred tax assets comes about due to taxable temporary differences. | False |
| Which of the following represents the formula to find the income tax expense for 2018? | |
| True or False: The temporary difference is the difference reported on the financial statements between the tax basis of an asset and its carrying value. | True |
| Multiplying the cumulative temporary difference by the tax rate could yield which of the following? | deferred tax liability |
| True or False: The increase in taxes payable in future years as a result of taxable temporary differences existing at the end of the current year is referred to as a deferred tax liability. | True |
| Which of the following is true of deductible amounts? | They decrease taxable income in future years. |
| Jon is calculating the income tax expense for his company. Currently he is looking into the taxes payable for this period. Which of the following is Jon looking at? | current tax expense |
| Which of the following represents the deferred tax expense? | an increase in a deferred tax liability. |
| Revenues or gains included in pretax financial income before included in taxable income lead to ?? | Deferred tax liabilities |
| Expenses or loses being deducted to compute taxable income before they are subtracted to compute pretax financial income leads to? | Deferred tax liabilites |
| Revenues or gains included in taxable income before including them in pretax financial income leads to?? | Deferred tax assets |
| Expenses or loses being deducted to compute pretax financial income before deducting them in taxable income leads to ??? | Deferred tax assets |
| Which of the following will result in an effective tax rate that is lower than the statutory tax rate? | |
| A company that is allowed to exclude certain revenues from taxation will have an effective tax rate that is ________ its statutory tax rate. | less than |
| Revenues or gains that are taxable AFTER they are recognized in financial income will increase the deferred tax ________ account. | liability |
| Revenues or gains that are taxable BEFORE they are recognized in financial income will increase the deferred tax ________ account. | asset |
| An example of a temporary difference that is a taxable revenue or gain after it is recognized in financial income is ________________ | an installment sale accounted for on the accrual basis for financial reporting purposes and on the installment (cash) basis for tax purposes. |
| True or False: Subscriptions received in advance and advance rental receipts are examples of taxable temporary differences. | False |
| Which of the following will result in an effective tax rate that is lower than the statutory tax rate? | depleting natural resources in excess of their cost |
| Expenses or losses that are deductible AFTER they are recognized in financial income will increase the deferred tax ________ account | asset |
| expenses or losses that are deductible BEFORE they are recognized in financial income will increase the deferred tax ________ account. | liability |
| If a company uses the equity method to account for an investment for financial reporting purposes, this would result in a __________ difference and a deferred tax __________. | temporary; liability |
| Jake is getting ready to record a reversing difference for the Deferred Tax Asset account. How will this difference affect the account? | It will reduce the balance of the account. |
| A company that is allowed to exclude certain revenues from taxation will have an effective tax rate that is ________ its statutory tax rate. | lower than |
| In 2016, Foster Electronics computed different amounts for their taxable income compared to their accounting income. Which of the following items would create a permanent difference between accounting and taxable incomes for Foster? | A fine resulting from violations of OSHA regulations. |
| A temporary difference that results in a deferred tax liability will reduce taxable income ________ the originating year. | In |
Created by:
tbeeche