Question
1. Which of the following is generally false? Group of answer choices Permanent differences create deferred tax asset and deferred tax liability amounts. Income tax
1.
Which of the following is generally false?
Group of answer choices
Permanent differences create deferred tax asset and deferred tax liability amounts.
Income tax expense recorded in GAAP financial statements is matched with pre-tax accounting income in those financial statements.
If a company has a tax loss, they can record the tax benefit from that loss now if they are confident that they will be able to use it in the future.
Temporary differences don't affect a company's income tax expense because even though the item is not currently included in taxable income, the future tax benefit or liability is accrued.
2.
How are Deferred Tax Assets and Deferred Tax Liabilities reported in a company's financial statements. (Assume they relate to the same taxing jurisdiction).
Group of answer choices
The net amount is reported as a non-current asset or liability.
The net amount is reported as a current asset or liability.
As a component of Other Comprehensive Income.
The company will report both a net current amount, and a net non-current amount, based on when the temporary differences are expected to reverse.
3.
Assume that a company has pre-tax accounting income of $200,000. Included in this amount is an accrual for a loss contingency in the amount of $30,000. This is the only temporary or permanent difference. The tax rate is 25%. How much is Net Income?
$150,000
$172,500
$127,500
$62,500
4.
As of the beginning of the year, a company has an asset with a net book value of $50, and a tax basis of $42. At the end of the year, the same asset has a net book value of $45, and a tax basis of $34. How much is the temporary difference in the current year related to this asset?
Taxable income is $3 lower than pre-tax accounting income
Taxable income is $3 higher than pre-tax accounting income
Taxable income is $11 lower than pre-tax accounting income
Taxable income is $11 higher than pre-tax accounting income
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