CHAPTER 19 ACCOUNTING FOR INCOME TAXES IFRS questions are available at the end of this chapter with correct answers

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5. Deductible amounts cause taxable income to be greater than pretax financial income in the future as a result of existing temporary differences. Ans: F, LO: 1, Bloom: C, Difficulty: Moderate, Min:... 1, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 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. Ans: T, LO: 1, Bloom: K, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 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. Ans: F, LO: 1, Bloom: C, Difficulty: Difficult, Min: 1, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 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. Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 9. A company should add a decrease in a deferred tax liability to income taxes payable in computing income tax expense. Ans: F, LO: 2, Bloom: C, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 10. Taxable temporary differences will result in taxable amounts in future years when the related assets are recovered. Ans: T, LO: 2, Bloom: K, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 11. Examples of taxable temporary differences are subscriptions received in advance and advance rental receipts. Ans: F, LO: 2, Bloom: C, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 19 - 6 12. Permanent differences do not give rise to future taxable or deductible amounts. Ans: T, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 13. Companies must consider presently enacted changes in the tax rate that become effective in future years when determining the tax rate to apply to existing temporary differences. Ans: T, LO: 2, Bloom: K, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 14. When a change in the tax rate is enacted, the effect is reported as an adjustment to income tax payable in the period of the change. Ans: F, LO: 2, Bloom: C, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 15. Under the loss carryback approach, companies must apply a current year loss to the most recent year first and then to an earlier year. Ans: F, LO: 3, Bloom: C, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 16. The tax effect of a loss carryforward represents future tax savings and results in the recognition of a deferred tax asset. Ans: T, LO: 3, Bloom: C, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 17. A possible source of taxable income that may be available to realize a tax benefit for loss carryforwards is future reversals of existing taxable temporary differences. Ans: T, LO: 3, Bloom: C, Difficulty: Moderate, Min: 1, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 18. Companies are permitted to offset any balances in income taxes payable against related income tax refund receivable or prepaid income taxes balances. Ans: T, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA BB: None, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting, IFRS: None 19. Companies should classify deferred tax accounts on the balance sheet as current assets or current liabilities. Ans: F, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communication, AICPA BB: None, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting, IFRS: None 20. The FASB believes that the defe [Show More]

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