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With respect to the difference between taxable income and pretax accounting income, the ta

With respect to the difference between taxable income and pretax accounting income, the tax effect of the undistributed earnings of a subsidiary included in consolidated income should normally be

a.Accounted for as a timing difference

b.Accounted for as a permanent difference

c.Ignored because it must be based on estimates and assumptions

d.Ignored because it cannot be presumed that all undistributed earnings of a subsidiary will be transferred to the parent company

2.Income tax allocation procedures are not appropriate when

a.An extraordinary loss will cause the amount of income tax expense to be less than the tax on ordinary net income

b.An extraordinary gain will cause the amount of income tax expense to be greater than the tax on ordinary net income

c.Differences between net income for tax purposes and financial reporting occur because tax laws and financial accounting principles do not concur on the items to be recognized as revenue and expense

d.Differences between net income for tax purposes and financial reporting occur that will not reverse.

3.Which of the following would cause a deferred tax expense?

a.Write-down  of goodwill due to impairment

b.Use of equity method where undistributed earnings of  a 30 percent owned investee are related to probable future dividends

c.Premiums paid on insurance carried by company (beneficiary) on its officers or employees

d.Income is taxed at capital gains rates

4.Differences between taxable income and pretax accounting income arising from transactions that, under applicable tax laws and regulations, will not be offset by corresponding differences or “turn around” in future periods is a definition of

a.Permanent differences

b.Timing differences

c.Intraperiod tax allocation

d.Interperiod tax allocation

5.The tax effect of a difference between taxable income and pretax accounting income attributable to losses of a subsidiary is normally recognized for

a.Neither carrybacks nor carryforwards

b.Both carrybacks and carryforwards

c.Carrybacks but not carryforwards

d.Carryforwards but not carrybacks

6.Which of the following is not affected by tax allocation within a period?

a.Income before extraordinary items

b.Extraordinary events

c.Adjustments of prior periods

d.Operating revenues

7.Under the comprehensive deferred interperiod method of tax allocation, deferred taxes are determined on the basis of

a.Tax rates in effect when the timing differences originate without adjustment for subsequent changes in tax rates

b.Tax rates expected to be in effect when the items giving rise to the timing differences reverse themselves

c.Net valuations of assets or liabilities

d.Averages determined on an industry-by-industry basis

8.The accounting recognition of the benefit from a tax loss carryforward in most situations should be reported as

a.A reduction of the loss in the year of the loss with an appropriate valuation allowance

b.A prior period adjustment in whichever year the benefit is realized

c.An extraordinary item in the year in which the benefit is realized

d.An item on the retained earnings statement, not the income statement

9.Intraperiod tax allocation arises because

a.Items included in the determination of taxable income may be presented in different sections of the financial statements

b.Income taxes must be allocated between current and future periods

c.Certain revenues and expenses appear in the financial statements either before or after they are included in taxable income

d.Certain revenues and expenses appear in the financial statements but are excluded from taxable income

10.Assuming no prior period adjustments, would the following affect net income?

InterperiodIntraperiod

Income taxIncome tax

AllocationAllocation

Dec 09 2019 View more View Less

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