Recognition of tax benefits in the operating loss year due to a loss carryforward requires O only a note to the financial statements. the establishment of a deferred tax liability. the establishment of a deferred tax asset. the establishment of an income tax refund receivable.

Recognition of tax benefits in the operating loss year due to a loss carryforward requires O only a note to the financial statements. the establishment of a deferred tax liability. the establishment of a deferred tax asset. the establishment of an income tax refund receivable.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter18: Accounting For Income Taxes

Section: Chapter Questions

Problem 12GI

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

Recognition of tax benefits in the operating loss year due to a loss carryforward requires
O only a note to the financial statements.
the establishment of a deferred tax liability.
the establishment of a deferred tax asset.
the establishment of an income tax refund receivable.

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Definitions The FASB has defined several terms in regard to accounting for income taxes. Below are various code letters (for terms) followed by definitions. 1. The deferred tax consequences of future deductible amounts and operating loss carryforwards 2. A difference between the tax basis of an asset or liability and its reported amount in the financial statements that will result in taxable or deductible amounts in future years when the reported amount of the asset or liability is recovered or settled, respectively 3. Temporary difference that results in taxable amounts in future years when the related asset or liability is recovered or settled, respectively 4. The future effects on income taxes, as measured by the applicable enacted tax rate and provisions of the enacted tax low, resulting from temporary differences and operating loss carryforwards at the end of the current year 5. The change during the year in a corporations deferred tax liabilities and assets 6. The deferred tax consequences of future taxable amounts 7. The portion of o deferred tax asset for which it is more likely than not that a tax benefit will not be realized 8. Temporary difference that results in deductible amounts in future years when the related asset or liability is recovered or settled, respectively 9. The sum of income tax payable and deferred tax expense (or benefit) 10. The amount of income taxes paid or payable (or refundable) for the current year 11. An excess of tax deductible expenses over taxable revenues in a year that may be carried forward to reduce taxable income in a future year 12. The excess of taxable revenues over tax deductible expenses and exemptions for the year 13. Income tax expense divided by income before income taxes
Which of the following is not a cause of a difference between pretax financial income and taxable income in a given period? a. operating loss carryforwards b. permanent differences c. applicable tax rates d. temporary differences
The definition of gross income in the tax law is: All items specifically listed as income in the tax law All cash payments received for goods provided and services performed All income from whatever source derived All income from whatever source derived unless the income is earned illegally
Recognition of tax benefits in the loss year due to a NOL carry back involves: O The establishment of an income tax refund receivable. Only a note to the financial statements. The establishment of a deferred tax liability. O The establishment of a deferred tax asset.
Recognition of tax benefits in a loss year due to a loss carryforward requires A) the establishment of a deferred tax liability. B) only a note to the financial statements. OC) the establishment of an income tax receivable. OD) the establishment of a deferred tax asset.
A net operating loss occurs when tax-deductible expenses exceed taxable revenues. Tax laws permit the net operating loss to be used to reduce taxable income in future profitable years. How are loss carryforwards recognized for financial reporting purposes?
Which of the following causes a temporary difference between taxable and pretax accounting income? 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.
Which of the following is deducted from the financial income in computing for the taxable income? Excess of accounting depreciation from the allowed tax deduction Donations received during the year Penalties paid for late filing of tax returns Unrealized losses from FA@FVTOCI
A net operating loss occurs when tax-deductible expenses exceed taxable revenues. Tax laws permit the net operating loss to be used to reduce taxable income in other, profitable years by either a carryback of the loss to prior years or a carryforward of the loss to later years. How are loss carrybacks and loss carryforwards recognized for financial reporting purposes?
The purpose of an inter-period income tax allocation is to a. Allow reporting entities to fully utilize tax losses carried forward from a previous year. b. Allow reporting entities whose tax liabilities vary significantly from year to year to smooth payments to taxing agencies. c. Amortize the deferred tax liability shown on the balance sheet. d. Recognize an asset or liability for the tax consequences of temporary differences that exist at the balance sheet date.
This is not a requisite for business expense to be deductible. Group of answer choices It must be reasonable It must be ordinary and necessary It must be paid during the taxable year The withholding tax otherwise required have been deducted and remitted to the BIR
Expenditures currently deducted in the tax return but not included with expenses in the income statement until subsequent years create deferred tax liabilities. O True O False