FAR 5 Module 6

Question 1

What are permanent tax differences?

Answer 1

The differences between book income (financial accounting income) and taxable income (income reported on the tax return) that will never reverse.

Question 2

What’s included in intraperiod Tax Allocation?

Answer 2

Question 3

How is deferred tax expense calculated for temporary differences in the first year of operations? Include the role of tax returns and accounting records.

Answer 3

Deferred Tax Expense = Increase in Deferred Tax Liability (DTL) − Increase in Deferred Tax Asset (DTA).

Question 4

What are the temporary tax Differences?

How will deferred tax items reported?

Answer 4

Question 5

How do you calculate the effective tax rate?

Answer 5

Question 6

What changes would cause an increase in deferred tax liabilities for a cash basis taxpayer with accrual basis financial statements?

Answer 6

Question 7

What happens when the income tax expense > Income tax payable

Answer 7

Question 8

When must an entity establish a valuation allowance for a deferred tax asset, and what is it?

Answer 8