Chapter 16 Flashcards
To calculate tax expense, we follow a four-step process:
(1) calculate tax payable,
(2) calculate the ending balances of any deferred tax accounts or any liability for uncertain tax positions,
(3) calculate changes in those accounts, and
(4) plug for tax expense.
Deferred tax assets
Estimated expenses and losses
Prepaid expenses
Deferred tax liabilities
Prepaid expenses
Installment sales of property
temporary difference.
A deduction that is allowed on the tax return in one year, but is not recognized in financial income until a later period
Which of the following cause a deferred tax liability to occur?
Revenue being reported on the tax return after the income statement.
Expense being reported on the tax return before the income statement.
Taxable income formula
current tax expense / current tax rate
Taxable Income ex:
Salary, pensions, capital gains, rental, investments, and unearned income
tax expense f
payable income + deferred tax
taxable income f
+depreciations
-tax deductions
Book-tax difference
book value - tax basis
deferred tax liability
book-tax difference x app tax rate
valuation allowance
is required if a reasonable probability exist that a portion or all of a deferred tax asset will not be realized
effective tax rate f
tax expense / pretax acc income
balance for deferred tax liability f
future taxable amount x future tax rate
NoLs rules
2 years carryback
20 carry forward
