Income Taxes: Name: Date: Professor: Section: Score

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Chapter 9 Income Taxes NAME: Professor:

Section:

Date: Score:

QUIZ 1: 1. All of the following can result in a temporary difference between pretax financial income and taxable income except for a. payment of premiums for life insurance. b. depreciation expense. c. provision for pending lawsuits. d. product warranty costs. (Adapted) 2. Which of the following items results in a temporary difference deductible amount for a given year? a. Premiums on officer's life insurance (company is beneficiary) b. Recognition of unrealized gains on financial liabilities that are measured at fair value through profit or loss. c. Vacation pay accrual d. Accelerated depreciation for tax purposes; straight-line for financial reporting purposes (Adapted) 3. Which of the following temporary differences may result to a deferred tax liability? a. Accrued warranty costs b. Subscription revenue received in advance c. Unrealized losses on held for trading securities d. Depreciation (Adapted) 4. When enacted tax rates change, the asset and liability method of interperiod tax allocation recognizes the rate change as a. a cumulative effect adjustment. b. an adjustment to be netted against the current income tax expense. c. a separate charge to the current year's net income. d. a separate charge or benefit to income tax expense. (Adapted) 5. Current financial reporting standards currently are moving toward the a. no-deferral approach. b. partial recognition approach. c. comprehensive recognition approach.

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d. discounted comprehensive recognition approach. (Adapted) 6. If all temporary differences entering into the determination of pretax accounting income are considered in the computation of deferred taxes and income tax expense, then a. the no-deferral approach is being applied. b. the comprehensive recognition approach is being applied. c. the partial recognition approach is being applied. d. the net-of-tax method is being applied. (Adapted)

QUIZ 2: The next two items are based on the following: Bee Corp. prepared the following reconciliation year ended December 31, 20x0: Pretax accounting income Taxable income Difference Interest on municipal bonds Lower depreciation per financial statements Total differences

between book income and taxable income for the 500,000 300,000 200,000 50,000 150,000 200,000

Bee's effective income tax rate for 20x0 is 30%. The depreciation difference will reverse equally over the next three years at enacted tax rates as follows: Years Tax rates 20x1 30% 20x2 25% 20x3 25% 1. In Bee's 20x0 income statement, the current portion of its provision for income taxes should be a. 150,000 b. 125,000 c. 90,000 d. 75,000 2. In Bee's 20x0 financial statements, the deferred portion of its provision for income taxes should be a. 60,000 b. 50,000 c. 45,000 d. 40,000 3. In its December 31, 20x0 balance sheet, Quinn Co. reported a deferred tax asset of ₱9,000 and no deferred tax liability. For 20x1, Quinn reported pretax financial statement income of ₱300,000. Temporary differences of ₱100,000 resulted in taxable income of ₱200,000 for 20x1. At December 31, 20x1, Quinn had cumulative taxable differences of ₱70,000. Quinn's effective income tax rate

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is 30%. In its December 31, 20x1, income statement, what should Quinn report as deferred income tax expense? a. 12,000 b. 21,000 c. 30,000 d. 60,000 4. On its December 31, 20x1, balance sheet, Shin Co. had income taxes payable of ₱13,000 and a deferred tax asset of ₱20,000 before determining the need for a valuation account. Shin had reported a deferred tax asset of ₱15,000 at December 31, 20x0. No estimated tax payments were made during 20x1. At December 31, 20x1, Shin determined that it was more likely than not that 10% of the deferred tax asset would not be realized. In its 20x1 income statement, what amount should Shin report as total income tax expense? a. 8,000 b. 8,500 c. 10,000 d. 13,000