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Exam 16: Accounting for Income Taxes

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Question 51

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Woody Corp.had taxable income of $8,000 in the current year.The amount of MACRS depreciation was $3,000,while the amount of depreciation reported in the income statement was $1,000.Assuming no other differences between tax and accounting income,Woody's pretax accounting income was:

A) $ 5,000.
B) $ 6,000.
C) $10,000.
D) $11,000.

E) A) and C)
F) A) and B)

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Question 52

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Use the following to answer questions Puritan Corp.reported the following pretax accounting income and taxable income for its first three years of operations: Puritan's tax rate is 40% for all years.Puritan elected a loss carryback. As of December 31,2016.Puritan was certain that it would recover the full tax benefit of the NOL that remained after the operating loss carryback. -What would be the net loss in 2016 reported in Puritan's income statement?

A) $360,000.
B) $240,000.
C) $460,000.
D) $500,000.

E) All of the above
F) None of the above

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Question 53

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Two independent situations are described below.Each involves future deductible amounts and/or future taxable amounts produced by temporary differences: The enacted tax rate is 40% for both situations. Required: For each situation determine the: (a. )Income tax payable currently. (b. )Deferred tax asset - balance at year-end. (c. )Deferred tax asset change dr or (cr)for the year. (d. )Deferred tax liability - balance at year-end. (e. )Deferred tax liability change dr or (cr)for the year. (f. )Income tax expense for the year.

Use the following to answer questions 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%.Assume that no estimated taxes have been paid. - Tringali's tax rate is 40%. What should Tringali report as its income tax expense for its first year of operations?

Madison Company has taken a position in its tax return to claim a tax credit of $60 million (direct reduction in taxes payable) and has determined that its sustainability is "more likely Than not," based on its technical merits.The tax credit would be a direct reduction in current Taxes payable.Madison believes the likelihood that a $60 million,$36 million,or $12 million Tax benefit will be sustained is 25%,30%,and 45%,respectively.Madison's taxable income is $510 million for the year.Its effective tax rate is 40%.What is Madison's income tax expense For the year?

Listed below are 5 terms followed by a list of phrases that describe or characterize each of the terms.Match each phrase with the number for the most correct term.

Which of the following causes a permanent difference between taxable income and pretax accounting income?

Required: Prepare a compound journal entry to record Typical's income tax expense for the year 2016.Show well-labeled computations.

Which of the following usually results in an increase in a deferred tax asset?

Which of the following usually results in an increase in a deferred tax liability?

Use the following to answer questions In LMC's 2016 annual report to shareholders,it disclosed the following information about its income taxes: INCOME TAXES Deferred income taxes reflect the net tax effects of temporary differences between the amounts of assets and liabilities for accounting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of December 31 were as follows: -Indicate why LMC lists net operating loss carryforwards as a component of deferred tax assets.

The way companies deal with uncertainty in tax positions is prescribed by GAAP in FASB ASC 740-10: Income Taxes-Overall (previously FASB Interpretation No.48 (FIN 48)).Describe the two-step process provided by GAAP (previously FIN 48).

Under current tax law,generally a net operating loss may be carried back:

In 2016,Magic Table Inc.decides to add a 36-month warranty on its new product sales.Warranty costs are tax deductible when claims are settled.In its financial statements for 2016,Magic Table Inc incurs:

Plutonic Inc.had $400 million in taxable income for the current year.Plutonic also had a decrease in deferred tax assets of $50 million and recognized tax expense of $80 million.The company is subject to a tax rate of 40%.The change in deferred tax asset was a/an:

Several years ago,Western Electric Corp.purchased equipment for $20,000,000.Western uses straight-line depreciation for financial reporting and MACRS for tax purposes.At December 31,2015,the carrying value of the equipment was $18,000,000 and its tax basis was $15,000,000.At December 31,2016,the carrying value of the equipment was $16,000,000 and the tax basis was $11,000,000.There were no other temporary differences and no permanent differences.Pretax accounting income for the current year was $25,000,000.A tax rate of 35% applies to all years. Required: Prepare one journal entry to record Western's income tax expense for the current year.Show well-labeled computations for the income tax payable and the change in the deferred tax account.

What should Hobson report as income from continuing operations?

Due to differences between depreciation reported in the income statement and depreciation deducted for tax purposes,Lucas Corp.has $2 million in temporary differences that will increase taxable income next year.Assuming that Lucas has no other temporary differences,deferred income taxes should be reported in this year's ending balance sheet as a:

In 2016,Bodily Corporation reported $300,000 pretax accounting income.The income tax rate for that year was 30%.Bodily had an unused $120,000 net operating loss carryforward from 2014 when the tax rate was 40%.Bodily's income tax payable for 2016 would be

Four independent situations are described below.Each involves future deductible amounts and/or future taxable amounts produced by temporary differences reported first on: Required: For each situation,determine the taxable income assuming pretax accounting income is $100,000.Show well-labeled computations.