Chapter 10: Payables and Taxes Flashcards
What results in a DTL?
When income under GAAP is greater than Taxable Income = Future Taxable Amount
What results in a DTA?
When income under GAAP is less than Taxable Income = Future Deductible Amount
When should goodwill be recognized?
Goodwill can only be recognized in a business combination, so when goodwill has been created in the purchase of a business
What is a deferred tax expense or benefit?
The net change during the year in an entity’s deferred tax amount
What is the deferred tax expense/benefit equation?
Changes in DTL balances +- Changes in DTA balances
What is the JE for current income tax expense?
(DB) Income tax expense - current
(CR) Income tax payable
What is the JE if the DTL balance increased during the year?
(DB) Income tax expense - deferred
(CR) Deferred tax liability
What is the JE if the DTA balance increased during the year?
(DB) Deferred tax asset
(CR) Income tax expense - Deferred
What is required if a carryforward results in a future deductible amount?
The recognition of a deferred tax asset.
What is the JE required for a future deductible amount resulting from a carryforward?
(DB) Deferred tax asset
(CR) Income tax benefit from loss carryforward
When do DTLs arise?
When revenues or gains are recognized under GAAP before they are included in taxable income. Or when expenses or losses are deductible for tax purposes before they are recognized under GAAP.