A result of inter-period tax allocation is that:
A. Large fluctuations in a company’s tax liability are eliminated.
B. The income tax expense is allocated among the income statement items that caused the expense.
C. The income tax expense in the income statement is the sum of the income taxes payable for the year and the changes in deferred tax asset or liability balances for the year.
D. The income tax expense shown in the income statement is equal to the deferred taxes for the year.
14. Which of the following circumstances creates a future taxable amount?
A. Service fees collected in advance from customers: taxable when received, recognized for financial reporting when earned.
B. Accrued compensation costs for future payments.
C. Straight-line depreciation for financial reporting and accelerated depreciation for tax reporting.
D. Investment expenses incurred to obtain tax-exempt income (not tax deductible).
15. Which of the following usually results in an increase in a deferred tax liability?
A. Accrual of estimated operating expenses.
B. Revenue collected in advance.
C. Prepaid operating expenses, currently deductible.
D. All of the above are correct.
16. For its first year of operations, Tringali Corporation’s reconciliation of pretax accounting income to taxable income is as follows:
Tringali’s tax rate is 40%.
What should Tringali report as its income tax expense for its first year of operations?
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