Concepts CH 10

Question 1

Current Liabilities

Answer 1

Obligation that will be paid with current assets or other current liabilities - Recorded at net settlement value

Question 2

Accrued Expenses

Answer 2

Meets recognition criteria but has not been paid

Question 3

Taxes Payable - FICA-MED-FUTA

Answer 3

EE Share
ER Share
Fed w/h
Expense as incurred

Question 4

Taxes Payable - Sales

Answer 4

Expense as incurred

Question 5

Taxes Payable - Property

Answer 5

Expense by monthly accrual

Question 6

Warranty

Answer 6

Written guarantee of the integrity of product or service

Question 7

Warranty - Assurance

Answer 7

Will function as expected

Not available for purchase

Question 8

Assurance Warranty Liability

Answer 8

Created if
Warranty Expense is probable
Amount can be reasonably estimated
Amount is material 
   Cost recognized when related revenue is recognized

Question 9

Service Type Warranty

Answer 9

Purchased separately
Account for a Contract Liability
Revenue Recognized over time
  Continuous - Straight-line
  Other - Proportionate with estimated service cost

Question 10

Tax Accounting

Answer 10

Asset/Liability approach

Question 11

DTL

Answer 11

Future taxable amount x enacted tax rate

Question 12

DTA

Answer 12

Future deductible amount x enacted tax rate

DTA’s are non-current

Question 13

Tax benefit - tax position

Answer 13

an entity recognizes in its f/s the largest benefit that is more likely than not to realized upon settlement

Question 14

Gift cards

Answer 14

When sold are recorded as deferred revenue. When redeemed or expire they become revenue because the performance obligation has been satisfied

Question 15

Deferred Tax Expense/Benefit is

Answer 15

the net change during the year in entity’s DTAs and DTLs

Question 16

The result of settlement of a liability related to an expense or loss that is deductible for tax purposes subsequent to being recognized in f/s

Answer 16

future deductible amounts

Question 17

Records deferred tax consequences attributable to taxable temporary differences

Answer 17

DTL

Question 18

Differences between tax basis of asset or liability reported in F/S that will result in future taxable or deductible amounts in future years

Answer 18

temporary difference

Question 19

Deferred tax expense or benefit is

Answer 19

The net change in the year in the entity’s deferred tax liablitiies and assets

Question 20

Current liabilities also include

Answer 20

1) Obligations that by their terms, are or will be due on demand within 1 year (or op cycle)
2) Obligations that are or will be callable by a creditor within 1 year because of violation of debt covenant

Question 21

Tax income tax expense

Answer 21

Current portion + deferred portion - Deferred benefit
or
(TI + Change DTL - Change DTA) x enacted tax rate

Question 22

Tax position benefit recognized in F/S

Answer 22

The largest benefit that is more than 50% likely to realized upon settlement

Question 23

Intraperiod income tax allocation arise from

Answer 23

items included in the determination of taxable income may be presented in different sections of the F/S

Question 24

Income tax expense or benefit

Answer 24

is the sum of (1) current tax expense or benefit and (2) deferred tax expense or benefit.

Question 25

Current tax expense or benefit

Answer 25

is the amount of taxes paid or payable (or refundable) for the year as determined by applying the enacted tax law to the taxable income or excess of deductions over revenues for that year.

Question 26

Taxable income

Answer 26

is the income calculated under the tax code. Taxable income equals pretax accounting income adjusted for permanent and temporary differences.

Question 27

Deferred tax expense or benefit

Answer 27

is the net change during the year in an entity’s deferred tax amounts.

Question 28

temporary difference (TD) results when

Answer 28

the GAAP basis and the tax basis of an asset or liability differ.

Question 29

A permanent difference

Answer 29

is an event that is recognized either in pretax financial income or in taxable income but never in both. It does not result in a deferred tax amount.

Question 30

Unearned Revenues

Answer 30

Should be recognized when the related performance obligation is satisfied. Unearned revenue should be credited at the time of sale for amount received

Question 31

create a temporary difference in liability versus cash tax basis and accrual accounting

Answer 31

PP Insurance and Rent Receivable

Question 32

Service contract fees are not recognized until

Answer 32

the services are provided and the performance obligation is satisfied. Thus, the fees collected in advance should be reported as unearned (deferred) revenue (a contract liability) in the liability section of the balance sheet until the services are provided

Question 33

The scope of such guidance extends to the tax consequences of

Answer 33

1) revenues, expenses, gains, and losses included in taxable income of a year other than the year when they are recognized in income for financial reporting purposes; (2) other events that create differences between the tax bases of assets and liabilities and their amounts for financial reporting purposes; and (3) operating loss or tax credit carrybacks for refunds of taxes paid in prior years and carryforwards to reduce taxes payable in future years.