8/4/16 - 8/6/16

Question 1

A change in circumstances that results in a change in judgment concerning the potential realization of a deferred tax asset should be recognized in income from continuing operations in the period of the change.
T or F?

Answer 1

True.

Question 2

What are some items subject to intraperiod income tax allocation?

Answer 2

• Accounting principle changes treated retrospectively
• Income from continuing operations
• Discontinued operations

Question 3

A “net operating loss carry forward” can be recognized in the year of loss.
T or F?

Answer 3

False, U.S. GAAP does not permit this recognition, but a deferred asset should be reduced by a “valuation allowance” based on the “more likely or not” test of expected realization. It is generally assumed that a NOL in the current period means that there is a greater than 50% chance that there will be NOLs in future periods.

Question 4

What accounting recognition occurs for non-completed transactions?

Answer 4

None. Accounting recognition is only given to completed transactions.

Question 5

How is the effective tax rate calculated?

Answer 5

Income tax expense/pre-tax income