Chapter 19 - Accounting for Income Taxes Flashcards
Income tax expense is based on ____ income.
Pretax, taxable, operating
Pretax
An increase in taxes payable in future years as a result of taxable temporary differences is called a ____.
Deferred tax liability
An increase in taxes saved in future years as a result of deductible temporary differences is called a ____.
Deferred tax asset
A deferred tax valuation allowance account is used to recognize a reduction in a ______.
Deferred tax asset
Which of the following are temporary differences that are normally classified as expenses or losses and are deductible after they are recognized in financial income?
Prepaid rent
Product warranties
Depreciable property
Fines
Product warranties
Recognition of tax benefits in the loss year due to a loss carryforward requires the establishment of ____.
a deferred tax asset
How should deferred taxes be presented on the balance sheet?
In two amounts:
Net current and net noncurrent
The FASB believes the most consisted method for accounting for income taxes is the ____ method.
asset-liability
A deferred tax expense is a(n) (increase/decrease) in a deferred tax (asset/liability).
Increase/Liability
The journal entry to record a reduction in deferred tax asset includes a credit to _____.
Allowance to reduce deferred tax asset to expected realizable value
Tax rates other than the current tax rate may be used to calculated the deferred income tax amount on the balance sheet if the future tax rates _____.
have been enacted into law
A deferred income tax asset or liability is usually classified as current or concurrent based on what?
The classification of the related asset or liability
What is the final step in the computation of deferred income taxes?
Reduce deferred tax assets by a valuation allowance if necessary
Income tax payable is based on:
income before taxes, income for book purposes, pretax financial income, taxable income
Taxable income
Taxable amounts are temporary differences that require the recording of a ______.
deferred tax liability
Depreciation could result in future deductible or taxable amounts. (True/False)
True
Future deductible amounts case the recording of a ______.
Deferred tax asset
Income tax expense is computed as income tax payable plus or minus what?
The change in deferred income taxes
What is the treatment of a net operating loss?
Carried back 2 years or carried forward up to 20 years
The increase in the balance of deferred tax liability minus the increase in the balance of deferred tax asset is _____.
Deferred tax expense
Pretax financial income is determined according to
the Internal Revenue Code
GAAP
GAAP
Proceeds from life insurance carried by the company on key officers or employees is an example of a (temporary/permanent) difference.
Permanent
In computing deferred income taxes for which graduated tax rates are a significant factor, companies are required to use _____ tax rates.
Average
