The provisions of the Tax Code pertaining to the imposition of Improperly Accumulated Earnings Tax has been O reduced by the CREATE from 10% to 5% O increased by the CREATE from 10% to 15% maintained by the CREATE. repealed by the CREATE.
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- Deferred Tax Assets. Components of the deferred tax asset of Biosante Pharmaceuticals, Inc., are shown in Exhibit 2.14. The company had no deferred tax liabilities. REQUIRED a. At the end of 2008, the largest deferred tax asset is for net operating loss carryforwards. (Net operating loss carryforwards [also referred to as tax loss carryforwards] are amounts reported as taxable losses on tax filings. Because the tax authorities generally do not pay corporations for incurring losses, companies are allowed to carry forward taxable losses to future years to offset taxable income. These future tax benefits give rise to deferred tax assets.) As of the end of 2008, what is the dollar amount of the companys net operating loss carryforwards? What is the dollar amount of the deferred tax asset for the net operating loss carryforwards? Describe how these two amounts are related. b. Biosante has gross deferred tax assets of 28,946,363. However, the net deferred tax assets balance is zero. Explain. c. The valuation allowance for the deferred tax asset increased from 21,818,084 to 28,946,363 between 2007 and 2008. How did this change affect the company's net income?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 taxesAssuming a 35% statutory tax rate applies to all years involved, which of the following situations will give rise to reporting a deferred tax liability on the balance sheet? I. A revenue is recognized for financial reporting purposes but not for tax purposes. II. An expense is deferred for financial reporting purposes but not for tax purposes. III. An expense is deferred for tax purposes but not for financial reporting purposes. IV. A revenue is deferred for tax purposes but not for financial reporting purposes. a. item II only b. items I and II only c. items II and III only d. items I and IV only
- Assuming a 35% statutory tax rate applies to all years involved, which of the following situations will give rise to reporting a deferred tax liability on the balance sheet?I. A revenue is recognized for financial reporting purposes but not for tax purposes.II. An expense is deferred for financial reporting purposes but not for tax purposes.III. An expense is deferred for tax purposes but not for financial reporting purposes.IV. A revenue is deferred for tax purposes but not for financial reporting purposes. Group of answer choices items I and II only items II and III only item II only items I and IV onlyIn Step 1 the income tax expense of $8,750,000 is correct. The deferred tax liability and income tax payable are incorrect. In Step 2 the net income is correct.Unless a company has a legal right of set-off, IAS 12 Income Taxes, requires disclosure of all of the following information for deferred tax in the statement of financial position: I The amount of deferred tax assets recognised II The amount of the deferred tax liabilities recognised III The net amount of the deferred tax assets and liabilities recognised IV The amount of the deferred tax asset relating to tax losses a. I, II and III only b. III and IV only c. I, II and IV only d. IV only
- 1. What amount of permanent difference between book income and taxable income existed at year end?a. 520,000b. 360,000c. 800,000d. 280,0002. What amount of current tax expense should be reported? a. 786,000b. 510,000c. 750,000d. 678,0003. What amount of income tax payable should be reported?a. 498,000b. 606,000c. 330,000d. 570,0004. What amount of total tax expense should be reported?a. 714,000b. 726,000c. 642,000d. 594,000When a company pays taxes that were previously recorded as a deferred tax liability, the temporary difference ________. Group of answer choices decreases reverses increases originatesIndicate whether the following statements are "True" or "False" regarding the statute of limitations. a. If no return is filed or a fraudulent return is filed, assessments can be made at any time. b. If a taxpayer omits an amount of gross income in excess of 25 percent of the gross income stated on the return, the statute of limitations does not apply. c. In general, any tax that is imposed must be assessed within three years of the later of (a) the filing date of the return or (b) the unextended due date of the return. d. The statute of limitations may be extended for a fixed period of time by mutual consent of the IRS and the taxpayer.
- B. GYV Ltd has the following deferred tax balances as at 30 June 2019.Deferred tax asset $9 00 000Deferred tax liability $7 00 000The above balances were calculated when the tax rate, was 20 per cent. On 1 December 2019 the government raises the corporate tax rate to 25 per cent.Required:Provide the journal entries to adjust the carry-forward balances of the deferred tax asset and deferred tax liability.The deferred tax expense is the Select one: a. decrease in balance of deferred tax asset minus the increase in balance of deferred tax liability. b. increase in balance of deferred tax asset plus the increase in balance of deferred tax liability. c. increase in balance of deferred tax asset minus the increase in balance of deferred tax liability. d. increase in balance of deferred tax liability minus the increase in balance of deferred tax asset.Company K operates in a jurisdiction that levies an income tax with the following rate structure: Percentage Rate Bracket 7% Income from −0− to $75,000 10 Income from $75,001 to $150,000 15 Income in excess of $150,000 Company K incurs a $23,600 deductible expense. Required: Compute the current year tax savings from the deduction assuming that Company K’s taxable income before considering the additional deduction is $69,200. Compute the current year tax savings from the deduction assuming that Company K’s taxable income before considering the additional deduction is $170,800. Compute the current year tax savings from the deduction assuming that Company K has a $5,100 loss before considering the additional deduction.
